the study was completed by economic planning systems (eps

CITY OF MOUNTAIN VIEW 1MEMORANDUM 1

DALE: November 3, 2011

TO: City Council

FROM: Ellis M. Berns, Assistant Community Development Director/Economic Development Manager

Tiffany Chew, Business Development Specialist

SUBJECT: NOVEMBER 8, 2011 STUDY SESSION— DOWNTOWN ECONOMICSTUDY AND DEVELOPMENT STRATEGY

INTRODUCTION

On April 13, 2010, the City Council authorized staff to proceed with various studies tobe completed prior to the sunsetting of the Downtown Revitalization Plan on April 9,2013. One of the challenges the City faces with the sunsetting of the DowntownRevitalization Plan is how to maintain the momentum and continue to strengthen the

downtown growth and vitality after the plan sunsets.

The purpose of this Study Session is to provide City Council with the findings from theDowntown Economic Study and Development Strategy (Attachment 1) whichidentified current market conditions of the downtown retail market and established

baseline information to develop future strategies for attracting new retailers to thedowntown and encouraging development opportunities.

BACKGROUND

The Downtown Mountain View Economic Study and Development Strategy is anupdate of the original 1999 Study and includes a downtown market assessment ofcommercial and residential growth, and an evaluation of potential businessdevelopment opportunities and strategies that support the downtown's continued

success. A primary goal of the Study includes identifying opportunities and strategiesthat continue to support the success of the downtown once the Revitalization

Authority' s Plan sunsets in April 2013.

The Study was completed by Economic Planning Systems ( EPS), a land economicsconsulting firm specializing in real estate development market analysis, real estateinvestment and land use policy. EPS was responsible for the original 1999 Study and is

City CouncilNovember 3, 2011

currently responsible for the economic analysis for the Mountain View General Plan2030.

FINDINGS

The Study concluded that during the past 10 years, downtown Mountain View hasexperienced particularly strong economic growth, despite the effects of the GreatRecession. Overall, downtown Mountain View functions as a successful central

business district with a healthy mix of residential and commercial uses and civic andcultural amenities serving the City and broader region. Only a handful of cities in theSan Francisco Bay Area provide a comparable mix and depth of commercial andresidential activity and an intermodal- transit connection within one district. The Studyidentified the following key economic-related developments over the past decade thathas contributed to the success of downtown:

Within the Revitalization District, the assessed valuation has increased by182 percent due to new construction, renovation and resale of properties;

The number of residential units has increased by about 13 percent, primarilythrough increased density and development of underutilized parcels;

Public transit service and ridership in the downtown have improved significantly,primarily through service and station area enhancements at the downtown TransitCenter. For example, Caltrain ridership at the downtown Transit Center hasincreased by approximately 87 percent since 2002;

Downtown employment levels have increased by over 20 percent with nearly1, 000 new employees;

Retail sales have increased by 56 percent, with increased performance of specialtyretail and personal services enhancing the strong dining and drinkingestablishment sector; and

While office vacancy rates have remained high throughout the region in the wakeof the Great Recession, the downtown Mountain View office market is currentlybelow 4 percent, the lowest it has been since the dot.com boom.

The study also evaluated several "opportunity sites" based on their future potentialfor redevelopment that would result in catalytic projects that could spur further

private revitalization in surrounding areas (Attachment 2). It was alsorecommended that the City may also want to evaluate the possibility of modifying


the Downtown Precise Plan to accommodate higher- intensity development. Thosesites identified in the study included:

1. Southeast corner of El Camino Real/ Castro Street (0.6 acre).

2. City-owned Bryant Street Public Parking Lot 12— California Street at BryantStreet ( 1. 6 acres).

3. St. Joseph' s Parking Lot—Castro Street at Church Street ( 1. 2 acres).

4. 383 Castro Street ( former Wienerschnitzel site)— Castro Street at California

Street former (0.3 acre).

5. Dunn Automotive/ City-owned Public Parking Lot 11— Bryant Street betweenDana Street and Villa Street (2. 1 acres).

6. City-owned Public Parking Lots 4 and 8— Hope Street between EvelynAvenue and Villa Street (1. 7 acres).

Today, the downtown has matured into a dynamic full-service district where peoplelive, work, shop and visit. Downtown Mountain View has formed a unique role withinthe community through its mixed-use environment, and historical and walkable" mainstreet" format. People who patronize the downtown include residents, employees,

shoppers and visitors. The active Transit Center and Civic Center also complement thediverse number of ground- floor retailers. In addition, the downtown has become a

desirable location for small- to mid-size start-up technology companies because of theamenities found in the downtown, which has resulted in an increase in demand for

office space.

DOWNTOWN COMMITTEE

Staff met with the Downtown Committee on May 10, 2011 and June 7, 2011 regardingthis Study. The Committee concurred with the finding and recommendations of theStudy that while the downtown has evolved into a full-service downtown, there are stillopportunities for the City to improve the physical environment of the downtown.


CONCLUSION

The Study concludes that despite the progress made in the past 10 years, there are stillopportunities for improvement such as diversifying the type and retail mix of tenantsand continuing the improvement of the physical environment. The Study recommendsthat the City create policies that address the following:

Continue the City's investment in public amenities, programming andinfrastructure;

Identify and recruit desirable tenants that complement the downtown and increaseregional demand for goods and services;

Harmonize the downtown development with City-wide efforts (i.e., San AntonioCenter or the General Plan' s " Village Center" concept); and

Evaluate and prioritize development of "opportunity sites" identified in the Studyand, if appropriate, consider modification to the Downtown Precise Plan tomaximize development opportunities on these sites and others in the downtown.

Prepared by: Appro

topal!Tiffany Chew Ran• a suda

elopment Specialist Community Development Director

avjBerns

Assistant Community Development Director/ Daniel H. Rich

Economic Development Manager City Manager

TC-EMB/ 6/ CAM

822- 11- 08- 11M-E- 1^

Attachments: 1. Draft Downtown Economic Study and Development Strategy2. Potential Opportunity Sites

Attachment 1

Draft Report

Downtown Mountain View

Economic Study and

Development Strategy

4,

Prepared for:

City of Mountain View

Prepared by:

Economic & Planning Systems, Inc.

EconomlC& Planning Systems, Inc.

2501 ninth Street, & wte 200 June 2011

Berkeley. CA 94 71 0- 22 57

510 841 9190 telEPS # 20112

510 841 9208 fax

Berkeley

SacramentoDenierLos Angelo.www.epsys. com

Table of Contents

EXECUTIVE SUMMARY 1

Introduction and Background 1

Downtown Progress 1

Opportunities 2

Recommendations 4

1. INTRODUCTION, BACKGROUND AND APPROACH 6

Background and Policy Context 6

Study Area Geography 8

Methodology and Approach 11

Report Organization 12

2. INVESTMENT AND GROWTH IN DOWNTOWN 13

Historical Context 13

Remaining Development Capacity 19

3. DOWNTOWN MARKET PERFORMANCE AND ROLE 25

Office Sector 25

Retail Sector 30

Residential 37

4. DEVELOPMENT PROSPECTS AND STRATEGIES 41

Market Opportunities 41

Assessment of Opportunity Sites 46

Recommendations 50

List of Tables

Table 1 City- Led Downtown Investments before 2000 14

Table 2 Investment and Policy Initiatives in the Downtown ( 2000- 2010) 16

Table 3 Revitalization Plan Area Property Assessed Value ( FY 2000- 01 to FY 2009- 10) 17

Table 4 Population and Employment Growth, Downtown Compared to Citywide

2000- 2010) 18

Table 5 Downtown Mountain View AM Peak Passenger Activity ( 2002- 2010) 19

Table 6 Characteristics of Downtown Parcels Facing Castro Street 20

Table 7 Projected Land Use Growth 23

Table 8 Mountain View Top Private Employers 26

Table 9 Office Market Indicators, Q3 2010 28

Table 10 Downtown Office Tenant Mix 29

Table 11 Shopping Centers/ Districts within 25 miles of the Mountain View Downtown 31

Table 12 Taxable Sales by Category and Year 33

Table 13 Summary of Downtown Retail Sales by Category 34

Table 14 New Retail Establishments Since 2005 35

Table 15 Downtown Establishments by Category and Percentage of Sales ( 2003- 2010) 36

Table 16 Pedestrian Intercept Survey Results 37

Table 17 Condo Median Sales Price and Transactions 39

Table 18 Comparison of Mountain View 2010 Foreclosure Rates 39

Table 19 Examples of Businesses in Successful Downtown Areas 43

Table 20 Key Opportunity Sites Summary 48

Table 21 Potential Financing Mechanisms and Sources for Downtown Revitalization Efforts52

List of Figures

Figure 1 Downtown Precise Plan 9

Figure 2 Downtown Mountain View and Planning/ Analysis Districts 10

Figure 3 Downtown Underutilized Parcels 24

Figure 4 Downtown Opportunity Area and Underutilized Parcels 47

EXECUTIVE SUMMARY

Introduction and Background

This Downtown Mountain View Economic Study and Development Strategy ( Report) provides afocused market assessment and evaluation of potential business development strategies for

Downtown Mountain View. The Report identifies opportunities and strategies that support the

Downtown' s success as a civic, community, and commercial focal point of the City in the context

of ongoing changes in the regional and national economy. The Report provides a sequel to the

Market Feasibility Study and Development Strategy Report prepared in 1999 ( 1999 Report) thatdescribed the then current market conditions and provided a set of goals and recommendations

to advance the City' s Downtown planning and revitalization efforts.

While significant progress has been made over the intervening ten- plus years and the Downtown

has solidified its market position and performed well by most measures, it has yet to fully realize

its economic potential. Indeed, many of the issues and opportunities identified in 1999 remain.Thus, the earlier work continues to provide an important reference for ongoing strategic

planning. This new Report builds on the 1999 Report, describing progress over the last ten- plusyears and identifying additional opportunities in light of evolving economic and fiscal realities inthe wake of the Great Recession and the City' s emerging policy objectives and initiatives.

Regarding the City policy context, the Report coincides with the City' s General Plan 2030 Updatewhich will set the framework for land use in the City over the next 20 years, and the expiration

of the Mountain View Revitalization Authority Plan in 2013. The Draft General Plan 2030 Update

is considering policies designed to enhance the Downtown, such as improved transit connections

and linkages with key change areas elsewhere in the City ( e. g., Moffett Blvd). The MountainView Revitalization Authority which has been the catalyst for downtown investment over the last40 years, using property tax increment revenue to finance its activities, is set to expire in 2013after which tax increment revenue ( beyond what is needed to cover existing debt) will no longerbe available.

Downtown Progress

The Downtown has been the focal point of a great deal of planning, design, public investment,

and revitalization efforts during the past 40 years. During this period the City has invested over120 million in public and civic improvements in the Downtown. In addition to these direct

investments, a range of planning and revitalization efforts have been underway including

1) advancing Downtown planning and design efforts through the Downtown Precise Plan and

amendments, ( 2) establishing business improvement districts and a downtown parkingmaintenance district, ( 3) working with, and in some cases assisting, Downtown property- owners

with new development and property improvements, ( 4) continuing liaison to the Downtown

business community and tenant recruitment, and ( 5) marketing and sponsoring Downtownprograms and special events.

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Economic Study and Development StrategyDraft Report, June 2011

During the past ten years Downtown Mountain View has experienced particularly strongeconomic growth, despite the effects of the Great Recession ( commencing in the summer of

2008) as it has played out at the end of this period. Specifically, key economic related

developments over the past decade include, but are not limited to, the following:

Assessed valuation of the Downtown has increased by 182 percent, reflecting newconstruction, renovation, and re- sales of property.

The number of housing units has increased primarily through increased density anddevelopment of underutilized parcels, resulting in almost 300 new residents in the

Downtown since 2000, according to the 2010 Census

Transit service and ridership in the Downtown has improved, significantly, primarily throughservice and station area enhancements at the Caltrain Transit Center. For example, Caltrain

ridership at the Downtown Transit Center has increased by about 87 percent since 2002 andthis station consistently reports the third highest usage of any Caltrain Station behind SanFrancisco and Palo Alto.

Downtown employment levels are estimated to have increased by over 20 percent with

nearly 1, 000 new jobs.

Retail sales have increased by nearly 60 percent, with increased performance of specialty

retail and personal services augmenting the strong dining and drinking establishment cluster.

While office vacancies have remained high in the region in the wake of the recession, the

Downtown office market is currently the tightest it has been since the dot. com boom atslightly below 4 percent.

Overall, Downtown Mountain View currently exhibits a high level of economic vitality, functioning

as a successful Central Business District ( CBD) with a healthy mix of residential, commercial,

civic, and cultural uses serving the City and broader region. The Performing Arts Center, Library,City Hall, Eagle Park, city- supported events ( e. g., weekly farmers market, Thursday Night Live),and improved transit service have all strengthened the Downtown as an entertainment, dining,

and shopping destination and community amenity. Indeed, only a handful of locations in the

Peninsula, if not the entire San Francisco Bay Area, provide a comparable mix and depth ofretail, residential, and office activity with excellent transit access, all successfully integrated in asingle neighborhood or district.

Opportunities

Despite significant progress over the last decade, there remain opportunities for improvement in

Downtown Mountain View, further leveraging its unique setting and building on the goals outlined

in the EPS 1999 Report. These goals were ( 1) improving the physical environment through

renovation and redevelopment, ( 2) diversifying the type and mix of tenants, ( 3) improving the

quality of retailers to increase overall sales performance, and ( 4) expanding the scale ofbusinesses to support a " critical mass," especially in desired clusters of business types. Theseopportunities are summarized below for retail, office and residential land uses, respectively.

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Economic Study and Development Strategy

Draft Report, June 2011

Retail

There exist a variety of opportunities to build on the foot traffic associated with theDowntown' s office market, civic uses, and the regional draw of the eating and drinking

establishments. Although Downtown appears " busy" during both the day and evening hoursbased on the number of people on the street, pedestrian intercept surveys suggest that a

large proportion ( i. e., about 40 percent) of the traffic is related to work or other non- retail

related purposes. Moreover, about 80 percent of the retail traffic is related to eating or

drinking. Meanwhile, a variety of retail categories, including both apparel and specializedhome furnishing, accessory and decor establishments, are increasingly attracted tosuccessful downtown settings because of the significant amount of casual browsing and

window shopping" that can exist in these environments.

While the City has long targeted an additional grocery store in the Downtown, market trends,

local competition ( existing community shopping centers), and site constraints ( e. g., need foradequate parking) may make such a retailer difficult to attract. In addition, if a full- servicegrocery offered a strong selection of prepared and carry- out food options it would likely

directly compete with the Downtown dining establishments.

The addition of several high- profile " branded" retailers in categories other than eating and

drinking could draw a different type of visitor to the Downtown, greatly expanding itsconsumer base and sales performance. Presently two of the three national retail tenants in

the Downtown ( Starbucks, Subway, and CVS Pharmacy) are food and beverage- related.

Attracting other types of regional and/ or national credit retailers to the Downtown is alsolikely to make the redevelopment of several underutilized opportunity sites more feasiblefrom both a market and financial perspective. The advantages of such retailers need to be

balanced against the need to keep the area unique by maintaining local businesses.

The City' s planning and public investments have helped to stimulate substantial privatesector renovation with a corresponding upgrading of tenants over the past decade.Identification of under- performing retail space and evaluation of obstacles to improvementand expansion can lead to further improvement of the existing building inventory. It is also

important to note that most regional and national retailers require larger space as well as

certain levels of foot traffic before they move into a new neighborhood. Given thatDowntown appears to possess a significant level of foot traffic, a lack of quality spaceappears to be the biggest impediment.

Office

The Mountain View Downtown office market clearly benefits from its location in Silicon Valley and

affiliation with the City' s prominent high- tech companies. Although most of the City' s larger,high- tech companies are located in business parks elsewhere in the City, they have brought

national recognition that, combined with amenities such as transit and a " Main Street" format,

has helped to make the Downtown one of the top office submarkets in Silicon Valley, if not the

entire Bay Area. For example, based on such market indicators as lease vacancy rates,Downtown Mountain View ranks only behind San Francisco and Palo Alto, two locations that also

offer a mixed- use, downtown- oriented environment ( e. g., dining, transit, housing). The

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amenities and environment offered by the Downtown appears to be especially attractive to

smaller technology oriented tenants and startups, many of whom are priced out of Palo Alto.

A variety of Downtown market indicators, such as tightening vacancy and escalating lease rates,

suggest strong opportunities for expanding this sector' s presence. The strategic issue going

forward is identifying and assembling appropriate sites for new office development, especially in

light of existing financial hurdles, ( e. g., tight capital markets) and land availability. However, to

the extent that growing office demand can be accommodated with new development, it willreinforce the Downtown' s role and profile as a one of the higher- performing and " in- demand"

CBDs in the entire Bay Area, especially for high- tech startups. This will, in turn, provide spill-over benefits for both the Downtown retail and residential markets.

Residential

While market conditions for higher- density residential development are currently weak, housinghas been an integral part of the re- emergence of Downtown Mountain View over the last 20

years. Over the long term, high- density housing ( e. g., condominiums, townhomes, andapartments) will continue to be a successful component of the Downtown' s future development

and redevelopment efforts, driven by regional growth pressures and strong locational attributes

and amenities ( e. g., adjacent to transit, retail, and employment options). Residential

development also provides the added benefit of improving the overall financial performance ofmixed- use projects and, once built, increase pedestrian activity and customer traffic for the retailsector.

Recommendations

Although longterm market forces are expected to play a positive role in taking advantage of

market opportunities, continued City involvement will also be necessary. Implementation may

require amendments to existing land use requirements codified in the Downtown Precise Plan

related to parking standards and/ or building density ( e. g., Floor Area Ratio or height), whichmight improve development economics at certain locations. In addition, the City may also be

able to facilitate office and retail development through assistance in land assembly. Specificrecommendations include:

1. Continue Investments in Public Amenities, Programming, and Facilities. The

Downtown has greatly benefited from the substantial public investments made during the

past two decades. As a part of opportunity site development, there will be the need forinfrastructure and place- making investments including public space and amenities ( e. g.,

parks, plazas, public art), streetscape and gateway improvements, 2150 century infrastructure

including telecommunications ( e. g., broadband and wireless access), and additional publicparking capacity. In addition to physical improvements, other initiatives and programming,

including improved transit service, expanded BID program activities, and continuedDowntown marketing efforts, will be beneficial. Ongoing activities and events such as

Thursday Night Live," the weekly farmers market, and Performing Arts programming shouldalso be sustained. To accomplish this, the City will need to establish and leverage a variety

of new funding sources and a mechanism, especially with the expiration of the Revitalization

Authority.

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2. Identify and Recruit Desired Tenants. The City should continue tenant recruitment and

marketing actions targeting tenants that are likely to complement and enhance theDowntown' s profile as a vibrant mixed- use district with a range of cultural, entertainment,

civic, commercial and residential uses. The notion here is to pursue a range of tenants that

complement existing Downtown uses or serve expected increases in employment- based orregional demand for retail goods and services. The demographic profile of Downtown' s

diverse user groups, including office workers, residents, eating and drinking patrons, as wellas participants in the Downtown' s civic, cultural, and entertainment activities, present an

attractive market for a variety of retail tenants. Many of the Downtown residents, workers,

and visitors are young with a relatively high level of disposable and/ or discretionary incomededicated to more casual, incidental, or even impulse- related consumption. A range of retail

tenants in the apparel as well as a variety of specialized home furnishing, accessory and

decor categories actively target this market segment and, if successfully recruited to theDowntown, would further expand its offerings and market draw.

3. Harmonize Other Citywide Efforts with Downtown Development Objectives. The City

is currently involved in a number of ongoing planning efforts including the General PlanUpdate ( and its" village" concept), related revitalization of existing shopping centers, the

Housing Element, ABAG' s Regional Sustainable Communities Strategy, and the Grand

Boulevard initiative. The City should seek to harmonize these efforts, as necessary, so that

they support, or are at least compatible with, its goals for the Downtown. For example, therole and function of potentially competitive retail areas identified as part of the General PlanUpdate process, such as San Antonio Center or North Shoreline Boulevard, should be

addressed in the context of Citywide market dynamics to ensure that the Downtown' s role is

not diluted.

Generally speaking, the City should seek to preserve clear market distinctions within itsvarious retail districts in order to support the success of each while maintaining a balancedand supportable retail sector citywide. The Downtown has a unique profile and strong

competitive advantage in a number of areas, differentiating itself in the Peninsula as an

eclectic, trendy, mixed- use " place" with an authentic urban vibe. However, the City will still

need to appropriately plan several of the other" Focus Areas" defined in the General PlanUpdate to ensure they do not undermine the Downtown' s market position.

4. Evaluate and Prioritize Development of Opportunity Sites. Six significant opportunity

sites totaling over seven acres have been identified as a part of this development strategyeffort. Each of these sites has potential for redevelopment that can help in achieving overallDowntown development objectives. However, the level of actual development opportunity

and related development feasibility may vary considerably, along with the relativecontribution of the project to broader Downtown development objectives. Accordingly, an

effort should be undertaken to establish priorities for the opportunity sites focusing related

marketing, investment, and development efforts on those with the least constraints and the

highest potential benefit to the City. Again, it may be necessary to amend the DowntownPrecise Plan in order to effectively incentivize development at these opportunity sites.

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1. INTRODUCTION, BACKGROUND AND APPROACH

This Report provides a focused economic assessment and evaluation of potential business

development strategies for Downtown Mountain View. It has been prepared by Economic &

Planning Systems, Inc. ( EPS) for the City of Mountain View, with the primary goal of identifyingopportunities and strategies that continue to support the Downtown' s success as a civic,

community, and commercial focal point for the community once the Revitalization Authority' sPlan effectiveness time limit sunsets in 2013. The Report also seeks to understand and respond

to recent and ongoing changes in the regional and national economy and their potential impactson the Downtown.

In 1999 EPS completed a " Market Feasibility Study and Development Strategy Report" on the

Downtown that described prevailing market conditions and provided a set of market- driven goalsand recommendations to advance downtown planning and revitalization efforts. While significantprogress has been made over the last ten- plus years and the Downtown has solidified its market

position, in a number of respects it has yet to fully realize its economic potential. Indeed, manyof the issues and opportunities identified in 1999 are still valid and this earlier work can serve as

an important resource for ongoing strategic planning. Rather than repeat the earlier EPS

findings and recommendations, this Report attempts to build on the 1999 study, describingprogress over the last ten- plus years and identifying additional opportunities in light of evolving

economic realities.

Background and Policy Context

Economic and Policy Context

The Report had been prepared concurrently with a variety of other studies and efforts designedto inform policy and provide direction at a critical juncture for both the Downtown and City as awhole. This and other City studies and planning efforts are occurring as both the national and

regional economy appear to be emerging from the deepest and most prolonged recession sincethe Great Depression. Not only has this so- called " Great Recession" changed the economic

environment facing property owners, developers, and commercial tenants with existing orpotential interests in the Downtown, it is also contributing to major fiscal adjustments ( i. e.,budget cuts and/ or taxes) at the State and federal levels with likely implications for the survivalof local programs and services.

In addition to this economic and fiscal context, this study coincides with two policy- relateddevelopments with direct implications for the Downtown: ( 1) the General Plan 2030 Update

which will set the framework for land use in the City over the next 20 years, and ( 2) the

expiration of the Mountain View Revitalization Authority Plan in 2013. The Draft General Plan

2030 Update is looking at policies to enhance the Downtown, such as improved transit

connections and linkages with key change areas elsewhere in the City ( e. g., Moffett Blvd.).'

The General Plan Update identifies the following five ( 5) major change areas: North Bayshore Area

East Whisman Area, El Camino Real, San Antonio Area, and Moffett Boulevard.

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The Mountain View Revitalization Authority, established in 1969, has been a major catalyst fordowntown investment over the last 40 years, using property tax increment revenue to finance its

activities. After 2013, the Authority can no longer use tax increment revenue ( beyond what isneeded to cover existing debt) and it is already unable to issue new bonds to finance publicinvestment. 2

Other relevant studies and policy efforts with particular relevance to this Report include the

following:

Downtown Precise Plan. The Downtown Precise Plan, adopted in 1998 and amended

several times since then ( most recently in 2004), serves as the City' s primary regulatory

document for development and and use in the Downtown. The primary goal of theDowntown Precise Plan is to " provide a coherent framework for downtown development and

preservation, which will guide future privatesector actions." To this end, the Precise Plan

provides relatively proscriptive standards, guidelines, and building prototypes for tenseparate subareas in the Downtown, some down to the block level. Among other things, thisReport will explore if and how certain provisions or requirements in the Downtown Precise

Plan might be revised in order to further incentivize desired development.

Downtown Parking Study. The City has commissioned an extensive study to develop

parking management strategies for the Downtown. In addition to estimating long- termparking demand and supply dynamics, this study will evaluate the feasibility of developing a

parking structure to expand off-street parking in the Downtown on one of several City- ownedsurface lots.

Downtown Grocery Story Studies. The City has commissioned several studies that

examine the viability of a supermarket or specialty grocer in the Downtown. Although theEPS 1999 Report identified a specialty grocery tenant, especially one focused on the higher-end and/ or natural niche ( e. g., Whole Foods, Trader] oe' s, or Andronico' s) as a potential

opportunity, to date such a project has yet to materialize.

Business Improvement District ( BID) Study. The City is intending to retain a consultant

to help in formulating a longterm strategy for two Downtown BIDs that focuses on acomprehensive public and private funding plan to offset maintenance and operations costsonce the Revitalization Authority sunsets in 2013.

Key Study Objectives

The timing and purpose of this Report are motivated by a number of interrelated objectives,

including the following:

2 As of the writing of this Report, the State legislators were considering a proposal by Gov. berryBrown to eliminate Redevelopment Agencies as one way to help balance the budget deficit. Thestatus of this proposal and its potential implications for the Mountain View Revitalization Authority

remain uncertain.

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Ensure that the City has a blueprint or action plan and strategy for building on themomentum and continuing the success of the Downtown after the Revitalization Authoritysunsets in April 2013.

Understand and adapt to the changing market environment of the post- Great Recession era

and its implications for the Downtown, especially for retail.

Designate specific catalytic opportunity sites within the Downtown that if successfully ( re-)

developed are likely to have positive economic and urban design- related benefits, andidentify corresponding public actions, if any, that are likely to incentivize such projects.

Identify critical actions in the Downtown requiring the resources and/ or powers of the

Revitalization Authority that should be taken in the short term ( i. e., before April 2013). Forexample, the Authority may want to proceed with the possible acquisition of strategic

properties to facilitate the development of catalytic opportunities.

Ensure that the policies and implementation efforts associated with the General Plan 2030

Update are consistent with ( i. e., do not damage) the longterm revitalization goals and

economic vitality efforts in the Downtown.

Assess the feasibility of growing and diversifying the Downtown tenant mix to optimize futuremarket performance.

Study Area Geography

The Downtown Precise Plan boundary, as amended in 2004, is the primary geographic study areafor this Report. In the 2004 Downtown Precise Plan, the City drew boundaries to represent the

natural division of land use, building scale and activity that divides the Downtown from the

surrounding, mostly single- family residential, neighborhood. The current boundaries ofDowntown Precise Plan are illustrated in Figure 1 and include the Historic District, the core office

area in the middle of Castro Street, and the new Civic Center and City Centre mixed- use project.

Although the Downtown Precise Plan boundaries represent the primary study area, this report

draws on data and information from a variety of sources with overlapping but not identical

boundaries. For example, the boundaries for the Revitalization Authority Plan are slightly

different than the Downtown Precise Plan, which in turn differ from the BIDs, as well as

information from the City' s General Plan Update and the U. S. Census. The geographicrelationships between the Downtown Precise Plan boundary and other boundaries considered inthis Report are illustrated in Figure 2 and further described below:

U. S. Census Tract 5096.00: This Census Tract has been identified as most applicable to

the Downtown, although it is slightly larger than most of the other geographic areas

evaluated. The 2010 Census provides the most up- to- date and accurate demographic data

available at a relatively refined geographic level. As shown in Figure 2, Census Tract 5096is inclusive of but extends beyond the Downtown Precise Plan boundary.

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Revitalization Authority Plan Area. The Plan Area covered by the Revitalization Authority

comprises 16 City blocks bounded to the north by Evelyn Avenue, View Street to the east,Mercy Street to the south and Franklin Street to the west. In addition to collecting taxincrement generated within this area, the Authority has and continues to target it for a

variety of investments including public infrastructure, marketing and economic development

activities, and affordable housing. The Authority boundaries are generally smaller andcontained within the Downtown Precise plan, although a small corner falls outside of it.

Business Improvement District. There are two BIDs in the Downtown although the

geographic area of one is inclusive of the other. Both BIDs are primarily funded by

businesses located within the districts and provide funding to the Central Business

Association who markets and promotes Downtown. The largest BID boundary closely

matches but differs slightly from the Downtown Precise Plan.

Parking Maintenance Assessment District ( PMAD). Inside this area, the City isresponsible for the development of off- street parking facilities and may collect fees to cover

the operations/ maintenance costs associated with them. Property owners inside the PMAD

pay an assessment based on land- use and parking requirements. The PMAD is smaller andcontained within the Downtown Precise Plan.

Methodology and Approach

This analysis relies on a variety of information sources and research techniques described andreferenced as appropriate throughout the Report. The primary research tasks and data sources

include, but are not necessarily limited to:

Reviewing parcel data from the County assessor and other sources.

Analyzing investment activity, projects, and initiatives over the last ten years pursued byboth the Revitalization Authority and other entities.

Reviewing real estate market data from local brokerages and other online sources.

Conducting field surveys and site visits to the Downtown.

Reviewing demographic data for downtown from the U. S. Census and other online sources.

Reviewing taxable sales data for retail businesses in the Downtown and the City as a whole.

Interviewing local stakeholders—including private business owners, real estate brokers, andcity staff and other public agencies—about specialty retail, grocery stores, and independentstores in the Downtown and future opportunities for these uses.

Reviewing recent technical studies prepared for the City related to parking, grocery markettrends, and other market or real estate- related topics.

Reviewing tenant mix data from the Downtown Business Improvement Districts.

Economic& Planning Systems, Inc. 11 o=¢ mawvo, rzmwo., m. mawo¢ orrzeanmuz. m




The above information and analysis has been combined with EPS' s in- house background and

expertise to develop conclusions regarding the longterm market prospects and supportivestrategies for the various land uses under consideration. The actual amount and type of

development that can occur will depend on a variety of factors, many of which cannot be

predicted with certainty or are beyond the scope of this analysis. These include the intentionsand capabilities of individual property owners or developers, the direction and timing of futurebusiness cycles, local land use policies and requirements ( including those by the City and

neighboring jurisdictions), and local, State or federal programs affecting land development.

Report Organization

This Report is organized into four chapters, including the executive summary and this

introduction which summarizes the purpose, policy context, and study approach. Chapter 2

documents historical and existing land use and demographic conditions and evaluates the

Downtown' s development capacity based on existing physical conditions and land useregulations. Chapter 3 provides a market assessment for retail, office, and residential uses.

Chapter 4 evaluates the implications from the previous chapters for potential market and

development opportunities as well as business retention and attraction strategies consistent with

community goals for the Downtown. Several technical appendices are provided with backgrounddata, exhibits, and detailed calculations.

Economic& Planning Systems, Inc. 12 P. 2 QUOs 2ot, 3MVOOwnmwnlRwort\ 3ouedrafpu Ldoc

2. INVESTMENT AND GROWTH IN DOWNTOWN

This chapter documents the level of investment and growth in Downtown Mountain View over the

last ten years and assesses its capacity to accommodate further development based on existingland uses. The analysis is designed to provide a point of comparison and performance

assessment given the conditions and goals described in the EPS 1999 Market Feasibility and

Development Strategy Report and identify key parameters affecting land use going forward.

Historical Context

Like many Downtown' s, the history and economic evolution of Downtown Mountain View is

closely linked to its location and relationship to transportation infrastructure and trends.Specifically, the Downtown' s proximity to both El Camino Real and a key rail road line locatedalong the Central Expressway helped it become a center for civic and commercial activity.

As California' s oldest and longest road, El Camino Real served as the State' s original trade and

transportation corridor, connecting the State' s 21 Franciscan missions. El Camino Real' sprominence as a trade and passenger corridor evolved with the emergence of the rail road

toward the end of the 19`h Century. In 1888 a train depot was built along what is now EvelynAvenue, to serve the old San Francisco and San Jose Rail Road. El Camino Real experienced

resurgence in the early 20th century when the State designated it a key route in its effort tocreate a unified highway system for auto travel.

Mountain View was incorporated in 1902 as an agricultural community with a compact business

core centered along Castro Street and surrounded by farms, orchards, barns, and otheragriculture- based uses. Bookended by El Camino Real at the south and a rail depot to the north,Castro Street was a logical target for the commercial and public investments that ultimately

paved the way for Downtown development. For example, in 1905 Farmers and Merchants Bank,which would later become Bank of America, first opened on Villa and Castro. In 1909 the

cornerstone of the City' s first town hall, library and jail was laid on the southwest corner ofCalifornia and Castro Streets.

Another historically significant transportation investment affecting the evolution of the Downtownwas the improvement of Highway 101 as a limited access freeway starting in the 1960s.

Gradually Highway 101 replaced both El Camino Real and the rail road as the fastest and mostconvenient transportation corridor for shoppers and regional commuters. The advent of the

automobile, and with it more convenient auto- oriented shopping malls, steadily eroded the

Downtown' s position as a key regional commercial district serving Mountain View residents andregional travelers.

By the late 1960s the City recognized the economic position and performance of the Downtownhad declined significantly even as the City' s population had expanded. Consequently, over thenext 40 years the Downtown became a focal point of a great deal of planning, design, public

investment, and other efforts designed to support its revitalization. This process was formally

initiated in 1969 when the City Council established the Mountain View Revitalization Authoritywith a primary goal of revitalizing the downtown area. Subsequently, in 1988, the City approved

Economic& Planning Systems, Inc. 13 P:¢ 0000.¢ o, nmvcovmmwn\ Repo„¢ w no„ n, a„ zmC



the Downtown Precise Plan to articulate comprehensive development standards and guide public

and private investment. The Downtown Precise Plan has since been amended three times, as

summarized below.

Date Amended Summary

February 29, 2000 Updated land use and development standards in the

peripheral area surrounding the Historic Districti. e. Areas A though G)

April 24, 2001 Incorporate sign requirements and design

May 25, 2004 Formalized the Historic District; updated land use

and development standards in Historic District and

area south of Mercy Street ( Areas H, I, and 3).

Downtown Planning and Investment before 2000

The EPS 1999 Report in particular was completed following a period of significant City capital

investment in the Downtown, primarily through City and Revitalization Authority efforts, assummarized in Table 1 below. In addition to these direct investments, the City implemented a

wide range of revitalization techniques, including ( 1) advancing Downtown planning and designefforts through the Downtown Precise Plan and other efforts, 3 ( 2) establishing businessimprovement districts and a downtown parking maintenance district, ( 3) working with, and in

some cases assisting, Downtown property- owners with new development and propertyimprovements, ( 4) continuing liaison to the Downtown business community and tenant

recruitment, and ( 5) marketing and sponsoring Downtown programs and special events.

Table 1

City- Led Downtown Investments before 2000

Cost

Project in Millions of$ s)

Library 20.0

City Hall/ Civic Center 40.0

Eagle Park& Pool 2. 5

Castro Street Improvements 13. 0

Parking District[ 1[ 9. 0

Contribution to Transit Center 15.0

Evelyn Avenue Improvements 1. 4

Total Investment 100.9

11 Includes parking garage and renovation of surface lots.

3 Since the inception of the Authority, several citizen advisory committees have been established to

advise the City Council on activities in the Downtown. The current Downtown Committee consists of12 members that include property and business owners, at- large members, and one Councilmember.

Economic& Planning Systems, Inc. 14 vn20000n2mi2rmm.,, r,R, pom2oum„ rcpu2do<



Despite significant public planning and investment, there was a general sense that the Downtown

was not performing up to its potential, especially in the retail sector, and the 1999 EPS Report

was prepared in response to that. Specifically, the retail district appeared to lack a level of

diversity and quality typical of highly successful commercial districts, a perception reinforced byrelatively low sales performance. For example, the retail taxable sales of Downtown retailersaveraged about 45 percent of national ( Urban Land Institute) standards, while restaurant sales

were at about 80 percent, and there were few if any national credit retailers. Within this context

the 1999 EPS Report defined a set of market goals for the Downtown focused in the following

areas:

Renovation. Improving the physical quality and attractiveness of downtown buildings andstorefronts.

Diversity. Diversifying the current concentration of businesses to include a broader range ofretail goods and services.

Quality. Improving the quality of retailers by attracting national credit retailers and otherhigh- value retailers and entertainment-oriented businesses that could be expected to

improve overall sales performance.

Scale. Expanding the scale of retail businesses in the Downtown to improve " critical mass,"especially in desired " clusters" of business types. This included attracting new retail anchorsfor downtown, which could include mid- sized retailers or a cluster of retailers with the

collective drawing power equivalent to a larger anchor to complement the smaller and localretailers that predominated.

Downtown Planning and Investment ( 2000 — 2010)

Over the past decade, the City has continued to apply a variety of revitalization tools althoughdirect capital investment has been less significant than previous decades. However, private-

sector activity appears to have elevated relative to previous periods especially in the commercialsector, as described further in Chapter 3. With a few exceptions, the City and Authority havefocused on smaller- scale public improvements, programs, and policies to supplement the capital

projects built before 2000 and to facilitate ongoing privatesector activity.

As summarized in Table 2, the more significant projects associated with the Downtown over the

past decade are ( 1) assistance with land assembly necessary for the privately developed,

140, 000- square- foot Tishman Speyer office building at Castro and California Streets;2) completion of a four- story, five- level parking garage at California and Bryant Streets, which

includes a 14, 000- square foot retail space currently occupied by a CVS; and ( 3) improvements

associated with the Downtown Transit Center including Centennial Plaza and Train Station. In

addition, the Authority has continued to support a variety of smaller- scale programs and

initiatives related to retail tenant recruitment, building facade improvements ( about $ 150, 000

invested since 2000), streetscape elements ( e. g., trees and kiosks), and affordable housingdevelopment.

Economic& Planning Systems, Inc. 15 v., 2 Vo° 9,2m22MVDO 1/ 1row,naw°.. av1263tv,u.m,

Table 2

Investment and Policy Initiatives in the Downtown( 2000- 2010)

City Led Investments and Other EffortsPublic Improvements Programs I Policies/ Studies Private Development Projects

Bryant St. 5 deck parking garage Amendments to Downtown Precise Plan 140,000 sq. ft. Tishman Speyer officebuilding @ Castro St. and California St.

Affordable Housing Investment( e. g., 51 Sidewalk Cafe Ordinance Amended to 32, 150 sq. ft. office building @ 100 W.unit Evelyn project) include side- streets Evelyn Ave.

Transit Center( multi- purpose) for Light Facade Improvement Program Grants 30, 000 sq. ft. office building @ 401 CastroRail, VTA,& CalTrain 150K) St.

Centennial Plaza opened Support for Downtown Sign Ordinance 20, 000 sq. K. office/ retail building @ 303Bryant St.

Castro Streetscape improvementsCity sponsored events( e Farmer' s

20 residential units @ 364 Bryant St.Market, Thursday Night Live)

Alleyway improvementsDowntown Market Studies( Grocery

44 Condos @ 100 Bryant St.store, parking, economic strategies)

On- going marketing, promotions,

26600 sq. K. office building @ 600Downtown Signage Program outreach, and liaison( i. e corporate

California St.tours, tenant outreach and solicitation),

Castro street tree replacementSupport for Central Business Association Prometheus Development of 39

CBA) rowhouses @ 125 W. Dana St.

Other miscellaneous investments

New benches& trash cans

Steps Caulking/ BomaniteRetail building facade renovation @ 142-

New light fixtures156 Castro St.

Kiosks

Mountain View Hotel Redevelopment

14, 000 sq. ft. Longs Drugs( now CVS)

3- story mixed- use building @ 155 CastroSt

City Center Residential DevelopmentPhase I/ II)

Prometheus Development( Minton's)-

203 rental apartment units( under

construction)

50, 000 sq ft. office building developed byPSAI Realty @ 100- 200 W. Evelynproposed)

63,000 sq. ft. office building developed byDaniel Minkoff( proposed)

Classic Communities- 65 attached&

detached residential units( proposed)

Economic Planning Systems. Inc 6/ 1/ 2011 16 P120000s120112M VDowntownlModeU120112mode1_ ccm.xls



Other Development Activity and Growth

In addition to actions associated with the Revitalization Plan goals, other private- and public-

sector entities have continued to make investments or otherwise expand their presence in the

Downtown. Although detailed data is difficult to come by, the increase in property assessedvalue ( AV) in the Revitalization Plan boundaries provides some indication of the level of

investment, development, and other financial transactions that have occurred. For example, the

total Plan Area AV increased by 182 percent or at an annual rate of 12 percent between 2000and 2010, as shown in Table 3. This compares to the maximum allowable increase in AV of 2

percent per year for property that is not resold ( i. e., changes ownership) or undergoessubstantial renovation and improvement.

Table 3

Revitalization Plan Area Property Assessed Value ( FY 2000- 01 to FY 2009- 10)

Total Assessed

Category Value Annual% A

Fiscal Year

2000- 01 156, 026, 173

2001- 02 197, 824, 921 27%

2002- 03 220, 568, 262 11%

2003-04 266,741, 407 21%

2004-05 290,505, 444 9%

2005-06 329,948, 975 14%

2006-07 361, 832, 108 10%

2007- 08 373,288, 259 3%

2008- 09 445,489, 845 19%

2009- 10 439, 398,340 1%

2000 - 2009 Growth

283, 372, 167

182%

Avg. Annual 12%

The increasing privatesector activity in the Downtown over the past decade is generallysupported by available data on population and employment levels. For example, data associatedwith the 2010 Decennial Census and General Plan 2030 Update reports about 270 residents and

1, 110 jobs in the Downtown, an increase of 8 percent and 22 percent, respectively, since 2000,

compared to 4 percent citywide ( see Table 4). The level of job growth is especially impressive

given that the time frame compares a business cycle peak in 2000 with a trough in 2010.

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Table 4

Population and Employment Growth, Downtown Compared to Citywide ( 2000- 2010) 1

Downtown City-WideGrowth( 2000- 2010) Growth( 2000- 2010)

Avg Avg

Category 2000 2010 Amount % Annual 2000 2010 Amount % Annual

Total Population[ 1] 3, 333 3, 604 271 8% 0. 8% 70, 708 74. 086 3, 358 5% 0. 5%

Households[ 1] 1, 664 1722 58 3% 0. 3% 31, 159 31, 957 798 3% 0. 3%

Single Family Households[ 2] 810 640 - 170 - 21% - 2. 3% 13, 846 11, 571 - 2. 275 - 16% - 1. 8%

Mu tli Family Households 12] 854 1, 082 228 27% 24% 17, 313 20. 386 3. 073 18% 1. 6%

Total Jobs( Place of Work) 4, 954 6. 076 1, 112 22% 20% 59, 320 61, 464 2, 144 4% 0. 4%

II Data based on the Dicennial Census( 2000 and 2010). Sue area used for analysis is Densust Tract 509600( see Figure 2).21 Total household s were proportioned to Single and Multi Family households based on the atio reported in the Traffic Model Downtown Super DIStdd

in 2009 for the General Plan Update FIR Gee Figure 2).

Another public investment that appears to have significantly impacted the Downtown,

particularly commute patterns of local residents and employees, has been the introduction of theCaltrain Bullet Train in 2004 with increased stops at the Transit Center. As shown in Table 5,

total ridership has grown by almost 87 percent since 2002, experiencing its biggest annual jumpin 2004, with almost 600 new morning peak passengers ( a 46 percent annual increase). Since2004, the Downtown Transit Center has consistently reported the third- highest ridership of anyCaltrain Station ( San Francisco is # 1 and Palo Alto is # 2). Of particular interest, the Caltrain

ridership data suggest that increasingly, more and more passengers are arriving in DowntownMountain View in the morning, presumably to go to work, rather than are getting on the train to

employment destinations elsewhere. This pattern is evidence of Mountain View' s strength as an

employment hub in the region. The Downtown' s growing role as a CBD also has positive

implications for the retail district since workers represent potential shoppers.

Whether leaving or arriving, the Caltrain commute patterns demonstrate a stronger and growingorientation to northern Silicon Valley, the Peninsula, and San Francisco rather than locations tothe south. As further illustrated by more detailed ridership data provided in Appendix A, cities

ranked directly below Mountain View for overall ridership ( San Jose Diridon is # 4 and Millbrae is5) have the opposite commute pattern; most riders are getting on the train to leave San lose

and Millbrae in the morning. Even for those cities with higher ridership ( San Francisco and PaloAlto), the Downtown Mountain View station appears to be trending more towards in- commuting

than out- commuting. While Palo Alto and San Francisco have decreased the proportion ofpassengers arriving in their cities each weekday morning since 2002 in Mountain View this

proportion has increased. Specifically, the Downtown Transit Center increased from 51 percent

of passengers arriving in 2002 to 53 percent in 2010 while San Francisco and Palo Alto declinedfrom 75 percent to 70 percent and 76 percent to 73 percent, respectively.

Economic& Planning Systems, Inc. 18 P.¢ voeozdnu2nroowntowniReportper rza,sft,pr, zm,



Table 5

Downtown Mountain View AM Peak Passenger Activity ( 2002- 2010)

2002- 2010

2002 2003 2004 2005 2006 2007 2008 2009 2010 p To

Northbound

On 590 595 949 1, 046 1, 045 1, 109 1, 129 1227 1, 108 518 87. 8%

Off 171 134 127 130 135 139 151 145 117 54 - 31. 6%

Total 761 729 1, 076 1, 176 1, 180 1, 248 1, 280 1, 372 1, 225 464 61. 0%

Southbound

On 86 91 86 94 93 105 118 139 108 22 25. 6%

Off 537 450 698 735 1047 1126 1197 1310 1254 717 133. 5%

Total 623 541 784 829 1, 140 1, 231 1, 315 1, 449 1, 362 739 118. 6%

TotalOn 676 686 1, 035 1, 140 1, 138 1, 214 1247 1, 366 1, 216 540 79. 9%

Off 708 584 825 865 1182 1265 1348 1455 1271 663 93. 6%

Total 1, 384 1, 270 1, 860 2, 005 2, 320 2, 479 2, 595 2, 821 2, 587 1, 203 86. 9%

Source Catrain Annual Passenger Counts' Economic& Planning Systems. Inc.

Remaining Development Capacity

Although Downtown Mountain View currently has few vacant properties, much of the existingland uses do not reflect the maximum amount of development allowed under the existing Precise

Plan. For example, many of the parcels along Castro have been developed as one- to two- story

buildings and may have the potential to be redeveloped into higher- density uses ( the Precise

Plan generally allows up to four stories in the Historic District). In addition, the largest landowner in the Downtown is the City itself, with about 26 acres of land or about 30 percent of thetotal land area within the Precise Plan boundaries including ten surface parking lots, some of

which may have potential to accommodate vertical development over time. 4

Although in terms of physical capacity the Downtown could accommodate a significant amount of

new development, in reality future development will depend on a variety of factors, includingeconomic trends and their impact on development feasibility, community support, and the

ongoing success of revitalization efforts pursued by the Authority, the City, BIDs, and the privatesector. Estimating actual growth potential given these uncertainties presents a number of

challenges but can be informed by detailed review of existing land use conditions, as describedbelow.

Parcel Configuration and Ownership Patterns

The EPS 1999 Report documented a number of barriers affecting redevelopment in the

Downtown, most of which were related to existing property ownership patterns and uses.

Although some progress has been made in terms of parcel assembly and property renovation

designed to accommodate new tenants, many of the previously identified challenges remain.

4 This includes 8. 2 acres for the Civic Center complex.

Economic& Planning Systems, Inc. 19 P. 200007, 2011 2nvoo. oto., gremormzwzzeartpnz doe



To illustrate how existing conditions continue to affect redevelopment opportunities, Table 6

provides information on the parcels along Castro Street, the commercial spine of the Downtown.

Table 6

Characteristics of Downtown Parcels Facing Castro Street

Historic District South Castro

Arealltem Block 0- 399] [ Block 400- 999] Total

Parcel Count 59 27 86

Avg. Parcel Size( Square Feet) 6, 307 40, 156 16. 934

Number of Distinct Owners 52 22 72

Avg. Built Space( Square Feet> 0) 6, 141 34. 915 14, 519

Median Effective Year Built( Year> 0) 1955 1963 1960

Avg. 2009 Assessed Land Value I Land Sq. Ft. ( LV> 0) 85.62 56. 73 $ 65.53

Avg. 2009 Assessed Improvement Value/ Built Sq. Ft. ( LV> 0) 147.09 224.67 $ 201. 41

Note: Assessed value averages calculated as weighted averages: Aggregate AV I Aggregate Land Area in Sq. Ft.

Sources:' LandParcel' geodatabase provided by City of Mountain View; EPS

Several key, interrelated issues illustrated in Table 6 are described below.

Small and Narrow Parcels. In addition to fragmented ownership, the parcels along Castro

Street, especially in the Historic District, tend to be small and poorly configured for newdevelopment. For example, the average parcel size in the 100 to 300 blocks of Castro Street

is about 6, 300 square feet. In addition, the buildings typically have very narrow street

frontages ( e. g., 25 feet) in proportion to depth ( i. e., up to 150 feet depths). Whilerestaurants have been successful here, the buildings are too small in size or are configured

poorly relative to the needs of many desirable retail tenants from other product categories.In particular, high volume national and regional retailers seek larger space and broader

street visibility. Smaller parcels can also make it difficult for projects to accommodate theirparking requirements on site or may require expensive underground garages.

Numerous Properties and Owners. At the present time about 90 percent of the 86

parcels along Castro Street are separately held by different owners. Coordinated marketing,tenant recruitment, and other economic development activities under these circumstances

can be difficult and tend to optimize the interest of the individual owners above the

Downtown as a whole. In addition, assembling a parcel large enough for significantresidential or commercial development can require the cooperation of several players with

potentially divergent short- or longterm goals.

Economic& Planning Systems, Inc. 20 P: 0000smr, v. VOO. fm., nteepo, nzo ueamm1zm,



Existing Tenants and Leases. As noted, the Downtown has few vacant parcels ( other thanthe surface parking lots). Thus, any new development must overcome the financial hurdle ofassembling and purchasing land currently occupied by buildings and viable tenants. Thesebuildings often provide a secure, low- cost, and low- risk income stream to existing owners,which can represent a significant financial hurdle to redevelopment since potential marginal

rates of return ( for investments in renovation) are often below the rates of return for" doing

nothing." Other economic ( or non- economic) motives or circumstances may also discourageowners from making investments, including speculation and expected continued appreciation

of property value.

It should be noted that most of the redevelopment challenges described above are less prevalent

along the southern, or" upper," portions of Castro Street compared to the Historic District. Asshown in Table 6, for example, the average parcel and building sizes are significantly larger asone crosses California Street and approaches El Camino Real. This suggests that redevelopment

opportunities may be more feasible in this area.

City Growth Projections

As part of the General Plan 2030 Update process, City staff in conjunction with its consultantteam has developed a forecast of future development in various focus areas of the City, including

Downtown. These projections were based on a parcel- by- parcel analysis of existing uses and aset of technical assumptions and calculations related to the likelihood of ( re-) development. The

results from this analysis for the Downtown Precise Plan and Census Tract areas compared to

citywide are summarized in Table 7.

In addition, Figure 3 illustrates the key subareas in the Downtown that are assumed to be ( re-)

developed during the period of the General Plan ( i. e., through 2030) and form the basis for thecalculations in Table 7. The parcels shown in this figure have densities far below the maximum

designated by the General Plan and therefore present the greatest opportunities for growth.They do not take into account any impediments to future development from current land use.

As shown, analysis conducted for the General Plan 2030 Update finds a significant amount of

development potential and thus projects substantial growth in the Downtown over the next 20

years as it continues to mature as a vibrant mixed- use district. Specifically, the General Plan

anticipates a substantial amount of new, higher- density residential, retail and office uses, for the

most part exceeding growth rates for the City as a whole. For example, these projectionsenvision over 674 new residential units ( a 45 percent increase), mostly apartments or

condominiums, in the Downtown Census Tract ( relative to 28 percent City- wide). The amount of

office space within the Precise Plan boundary is projected to increase slower than the City as a

whole, although it still adds about 252, 000 square feet ( a 29 percent increase). Only the

number of single- family units in the Precise Plan boundary ( but not the Census Tract boundary)is projected to decline, although this is more than off-set by multifamily unit gains.

It is also worth noting that the General Plan Update projections envision a significant shift inretail and office space to the Downtown Precise Plan area and out of other locations in the

broader Downtown Census Tract. Meanwhile, the areas immediately surrounding the DowntownPrecise Plan area are expected to experience a conversion of retail to residential. The ability of

Economic& Planning Systems, Inc. 21 a 2oo0o512O1IInvuownrown\ w"m2OL 2d,mup<,ndX




the Downtown area to realize the growth and change envisioned in the General Plan Update will

depend on its market position and role in the regional economy as well as efforts by the City andother entities to support and foster privatesector investment.

Economic& Planning Systems, Inc. 22 P:¢ voawvm 12MVDo. omw?, Repoa,¢ m aha,wtlzdor

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3. DOWNTOWN MARKET PERFORMANCE AND ROLE

This chapter assesses the Downtown' s current market position within the City and broader

region, focusing on the performance of existing or emerging market niches that may serve as a

basis for ongoing ( re-) development and growth. The analysis is designed to identifyopportunities and inform corresponding policy initiatives discussed in Chapter 4.

Overall, Downtown Mountain View functions as a highly successful CBD with a healthy mix of

residential, commercial, civic, and cultural land uses serving the City and broader region. Asnoted in Chapter 2, both public- and privatesector investments have contributed to this

environment. On the public side, the Performing Arts Center, Library, City Hall, Eagle Park,

successful City supported events ( e. g., farmers market, Thursday Night Live), and improvedtransit service have all strengthened the Downtown as a destination and community amenity.

On the private side, the growing prestige of the Downtown' s high- tech market and improved mix

of retail, especially dining options, continue to attract interest from both local residents and

employers. It is also worth noting that the Downtown' s market position and vitality haveimproved over the last decade and since the completion of the EPS 1999 Report, even as the

regional and/ or national economy has faltered, as documented below.

Although the Downtown' s overall business environment is generally positive, various sectors

within it play distinct roles, with some playing a high- profile and regional function and othersserving a more secondary, supportive, and/ or peripheral function. The following sections furtherdescribe the market performance and roles of the office, retail, and residential sectors.

Office Sector

Regional Economic Context

The defining feature of Mountain View in general, and the Downtown in particular, is its centrallocation in one of the premiere technology- oriented economic clusters in the United States if notthe world. The Peninsula and Silicon Valley have experienced several significant cyclicaldownturns over the last ten years, concurrent with the decline of the dot. com era and the more

recent mortgage default- led financial crisis, which have contributed to declining market demand

and occupancy rates for office and R& D space. However, the region continues to successfullyreinvent itself with new technology- based sectors emerging as other sectors contract.

While most economists predict the current economic recovery process to be slow, available

indicators suggest that the Bay Area' s high- tech sectors are on a strong path toward recovery

and growth. For example, Silicon Valley employment grew by 12, 300 jobs between the end of2009 and 2010 while venture capital investment grew by 5 percent, and patent registrations also

increased 9 percent ( above the national increase of 6 percent) during this time periods Much of

this recent growth is being driven by emerging sectors, such as social media, clean- tech, and

s The Index of Silicon Valley 2011.

Economic& Planning Systems, Inc. 25 a 30000sd0112MV0O+m, ovnWep6nvo uearconz. eoc



biotechnology, directly related to and/ or derived from the San Francisco Bay Area' s coretechnological competencies.

Even as the region' s industry mix evolves, Mountain View has remained a focal point for office

and R& D tenants, cultivating many of the region' s top- rated technology firms for the last 15

years. Similar to the region as a whole, the City continues to evolve and redefine itself with the

loss of once- high- profile companies replaced by new or emerging industry leaders. For example,

as shown in Table 8, only five of the City' s current top ten employers were even in existence ten

years ago. In addition, five of the Mountain View' s top ten employers in 2000 are either no

longer in business or have left the City. However, citywide employment actually increased overthis period with over 2, 100 new jobs.

Table 8

Mountain View Top Private Employers

2009- 2010 2000- 2001

Entity Estimated# Rank % of City Estimated# Rank % of Cityof Employees Total of Employees Total

Top EmployersGoogle 10,000 1 16. 3%

Symantec 3,400 2 5. 5%

El Camino Hospital 2, 500 3 4. 1% 2, 025 3 3.4%

Microsoft Corporation 2,400 4 3.9% 1, 300 6 2. 2%

Intuit Corporation 1, 700 5 2. 8% 909 8 1. 5%

Synopsys, Inc. 1, 000 6 1. 6% 1, 626 5 2. 7%

Palo Alto Medical Foundation 800 7 1. 3%

KPMG 700 8 1. 1% 900 9 1. 5%

Linkedln 600 9 1. 0%

Omnicell 300 10 0. 5%

Silicon Graphics Incorporated ( SGI) 2, 500 2 4. 2%

Hewlett- Packard Company 2, 865 1 4. 8%

Netscape Communications 1, 800 4 3. 0%

Sun Microsystems 1, 242 7 2. 1%

Siemens 640 10 1. 4%

Subtotal 23, 400 38. 1% 16,007 27. 0%

Citywide 61, 464 59, 320

Source. City of Mountain View Comprehensive Annual Fiscal Report FY 10; Mountain View General Plan update,Economic 8, Planning Systems. Inc.

Mountain View' s economic landscape continues to be dominated by high- tech industry leaders

and their relative concentration has actually increased, as shown in Table 8. In early 2011, the

City' s two largest employers, Google and Symantec, account for more than 20 percent of totalemployment. By comparison, in 2000 the two largest employers, Silicon Graphics and Hewlett-Packard, accounted for less than 10 percent of the City' s jobs ( these two companies now have a

negligible presence in the City). It should be noted that the City itself is also a relatively large

Economic& Planning Systems, Inc. 26 n, 2ovoosp6113NVOowoto. mROOOm2o112darzre2 4° C


Economic Study and Development StrategyDraft Report, lune 2011

employer with about 868 full, part- time, and seasonal jobs, most of which are located in the

Downtown.

Downtown Performance and Growth

The Mountain View Downtown office market clearly benefits from its location in Silicon Valley and

affiliation with the City' s prominent high- tech companies. However, the Downtown plays aunique role in this regard because of its differentiated position as a mixed- use and Main- Street-

oriented CBD with a range of retail and other amenities, including a well- served transit center.

Although most of the City' s larger, high- tech companies are located in business parks elsewherein the City, they have brought national recognition that, combined with the Downtown amenities,

has helped to make the Downtown one of the top office submarkets in Silicon Valley, if not the

entire Bay Area.° For example, based on such market indicators as lease vacancy rates,

Downtown Mountain View ranks only behind San Francisco and Palo Alto, two locations that also

offer mixed- use, downtown- oriented amenities ( e. g., dining, transit, housing).

Despite its high profile, the Downtown office market is currently constrained by its size, both interms of total square feet and the type of space available. Although there are several Class A

buildings, much of the space is generally in older buildings and on second- and third- story floorsabove ground floor retail. The newest and highest- quality Class A building, the six- story

Tishman Speyer completed in 2004, is occupied by a single office tenant ( Fenwick & West LLP)

although it includes ground floor retail. Consequently, demand is primarily limited to smaller

tenants seeking 6, 000 square feet or less. This type of space has typically been attractive to

startups. However, large tenants looking for a signature address ( e. g., headquarters) withroom for expansion generally look elsewhere.

The following performance indicators for Downtown Mountain View reinforce the general trendsdescribed above ( see Table 9):

Lease and Occupancy Rates. Both lease and occupancy rates are relatively strong, far

exceeding the average for Silicon Valley. Indeed, according to brokers active in the market,true lease rates for quality, Class A Downtown office is second only to Palo Alto and the

reported rates reflect an above average proportion of sub- standard space. Indeed, the

Downtown office market is currently the tightest it has been since the dot. com boom at

slightly below 4 percent.?

6 Office brokers active in Silicon Valley and The Peninsula typically divide the region into a number ofsub- markets that generally correspond to geographically discrete concentrations of building space.Downtown Mountain View is one such sub- market in the broader Silicon Valley office market, as are

Palo Alto, Sunnyvale, Santa Clara and Cupertino.

7See, " Vacancies few in Mt. View", Silicon Valley/ San Jose Business Journal; April 29, 2011. Vol. 29,No. 5. It is also worth noting that, the current vacancy rate is artificially inflated because of a largesublease available at the Microsoft- subsidiary TellMe' s former campus on Villa Street. Sublease space

generally takes longer to lease up because the property owner continues to receive revenue from theprevious tenant.

Economic& Planning Systems, Inc. 27 on2omoazm l2.vo.,., im,. mReptut,2mumarcvu2.mc



Table 9

Office Market Indicators, Q3 2010

Building Square Feet Lease VacancyLocation Total Occupied Available Rates Rates

Mountain View

Downtown 1, 378, 136 1, 266, 507 111, 629 $ 2. 79 8. 1%

City-Wide 4, 422, 056 4, 015, 825 406, 231 $ 2. 73 9. 2%

Other Silicon Valley CitiesPalo Alto 10, 086, 440 9301, 257 785, 183 $ 4. 23 7. 8%

Sunnyvale 9, 302, 542 6,436, 056 2, 866,486 $ 3. 10 30. 8%

Santa Clara 9, 206, 565 7, 026, 134 2, 180,431 $ 1. 92 23. 7%

Cupertino 4, 426, 140 3, 947, 579 478,561 $ 2. 88 10. 8%

Silicon Valley Total 74, 872, 898 61, 257, 600 13,615, 298 $ 2. 55 18. 2%

Source: Cassidy Turley Market Reports, Economic& Planning Systems, Inc.

Size and Growth. The Downtown office market is relatively small, with about 1. 4 million

square feet, or about 30 percent of the City' s total office space, and less than 2 percent of

the Silicon Valley total. Moreover, the Downtown has added minimal new inventory over thelast ten years, even as occupancy and lease rates have improved. In addition to the and

assembly issues described in Chapter 2, tightening lending practices also appear to be

curtailing new development in recent years. For example, financing for a fully entitled officeproject on Evelyn Street has reportedly been hindered by a 50 percent pre- leaserequirement.

Tenant Types and Mix

The office tenant mix in the Downtown generally reflects the setting and space constraints

described above. Specifically, it is a high- demand location for small technology start- up firms,

many involved in more niche subsectors and/ or early- phase product development but oftenpriced out" of Palo Alto. The Downtown' s historic setting, restaurant options, and transit access

also make it attractive to younger workers and entrepreneurs, the segment that is often on the

cutting edge of various tech fields. In many ways the Downtown is serving as de- facto

incubator" space for the larger Silicon Valley region and thus as a valuable economic

development asset for the City. Going forward the City may want to support this role while

exploring options to retain businesses that have outgrown their Downtown space with expansion

opportunities elsewhere in the City.

Further detail on the composition of Downtown tenants is provided in Table 10 based on data

from the BIDs as well as other sources ( e. g., Internet and site visits). As shown, almost 40

percent of the tenants are involved in high- tech- related fields, especially Internet and software.

Meanwhile, professional and administrative sectors, which include tenants frequently involved in

Economic& Planning Systems, Inc. 28 s omm,, 2m, 2MVDOwnm" mRe"` m, Imkanmtl2 da



high- tech as service providers ( e. g., venture capital or law), account for about 36 percent of thefirms. Medical and health services also represent a significant proportion of Downtown tenants

at 13 percent of the total. It is important to note that these proportions represent the number of

firms rather than amount of employment or occupied space. Several major tenants, such as

Fenwick & West LLP and Kaiser Permanente, may be underrepresented by this indicator.

Table 10

Downtown Office Tenant Mix

U of

Tenant Category Establishments % of Total

High Tech Sector

Internet/ Software 73 31%

R& D Technical Services 10 4%

Telecom./ HardwareI' I

7 3%

Total 90 38%

Medical and Health Services 30 13%

Other Professional/ Administrative Services

Finance, Insurance,& Real Estate 41 17%

Other Professional/ Administrative Services 22 9%

Law 14 6%

Architect/ Design 8 3%

85 36%

Civic, Recreation, Cultural, and Other

Art, Recreation, & Education 14 6%

Community Service/ Religion 3 1%

Government 1 0%

Other/ Unkown 12 5%

30 13%

Total 235 100%

1] Includes AT& T co- location switching facility

Based on data from Downtown BID, EPS walking tour, online research, and other sources.

Economic& Planning Systems, Inc. 29 v.\200005 20112r+vw.. n.., 1a. pom2671) d„ noe12 me



Retail Sector

Regional Market Context

Downtown Mountain View' s retail sector must be viewed in the context of the overlapping and

interconnected trade areas that shape the shopping, commute, and leisure/ entertainment

patterns of residents, visitors, and workers within the broader region. 8 The City is centrally

located in a mature and supply- rich retail environment that contains the full spectrum of retail

offerings. In addition, the City itself also contains a relatively diverse, albeit disaggregated,

retail sector including a department store- anchored shopping center ( San Antonio Center), awell- traveled commercial corridor ( i. e., El Camino Real), and numerous neighborhood and stand-

alone commercial centers.

Table 11 provides an overview of the level of regional competition, listing the primaryorientation of significant retail destinations within 20 miles or less commute from the Downtown.

As shown, this broader trade area includes centers and districts that cater to everything from

daily needs and discount shopping to entertainment, tourism, high- fashion, and other specialtycategories ( e. g., ethnic and arts and crafts). In addition to regional malls, the table alsoindicates other Main- Street- oriented CBDs since this is a format and market position similar to

the Downtown.

The broader economic context has both positive and negative implications for Downtown

Mountain View' s retail sector. On the one hand, tenants or projects have the potential to attract

demand from a variety of market segments, including local and regional residents, commuters,and employers and their workers. Indeed, the market demographics within a 10- to 20- minute

commute from the Downtown meet or exceed the requirements of most retailers, in terms of

population, income, and other factors. On the other hand, this environment also creates a high

level of competition, making it difficult for a tenant or project to dominate a particular submarketor niche.

Market Growth and Performance

Over the last ten years, Downtown Mountain View' s retail sector has continued to solidify and

mature, building on the momentum from public investments, a successful office sector, and

marketing efforts by the Revitalization Authority, BID, and others. The retail sector has alsoadded a number of new tenants, replacing some of the low- volume establishments thatpredominated at completion of the EPS 1999 Report. However, from a physical perspective the

retail landscape remains largely unchanged, with most of the activity focused in the HistoricDistrict in relatively small, shallow spaces and only minimal new development.

A trade area is a geographic region that contains the elements of demand and supply that will

determine the performance of a particular retail district and/ or store. Trade areas are influenced by a

variety of factors, including the location and density of the targeted residential population, the locationof key competitors, the relative distance or travel time for each of the above, geographic andpsychological barriers, and existing commute and shopping patterns.

Economic& Planning Systems, Inc. 30 p: 20000s2m, 2MVm.. eo,. mR, Po, nem 12daftmu2. do'

Table 11

Shopping Centers/ Districts within 20 miles of the Mountain View Downtown

Shopping Center/District Distance Market

miles) Orientation

Mountain View

Downtown 0 Main Street CBD

San Antonio Shopping Center 2 Regional Center

Palo Alto

Stanford Shopping Center 7 Regional Mall

University Avenue 7 Main Street CBD

Downtown Sunnyvale 4 Main Street CBD

Downtown Los Altos 3 Main Street

Menlo Park B Main Street CBD

San Jose

Santana Row 11 Mixed Use/ Entertainment

Westfield— Oakridge 19 Regional Mall

Downtown San Jose Shopping 14 Main Street CBD

El Paseo de Saratoga 11 Regional Center

Westgate Shopping Mall 11 Regional Mall

Willow Glen Shopping District 15 Regional Mall

Great Mall in Milpitas 12 Regional Mall

Westfield— Valley Fair in Santa Clara 12 Regional Mall

Campbell

Pruneyard Shopping Center 14 Regional Mall

Downtown Campbell 14 Main Street CBD

Downtown Los Gatos 16 Main Street

Cupertino Village 6 Regional Mall

Source: Economic& Planning Systems, Inc.

Economic B Planning Systems. Inc. 5/ 24/ 2011 31 P.120000s120112MVOowntowntModelss120112mo0e1 ccm.xls



The current performance of the Downtown retail sector is highlighted by the following indicators:

Sales Growth. The Downtown has exhibited significantly strong sales growth over the last

ten years and represents a much larger proportion of the City' s retail base. For example,

while the EPS 1999 Report showed the Downtown representing about 5 percent of the City' s

total taxable saless, current data suggest that the share has more than doubled to about

11 percent. In fact, over the last six years the Downtown has accounted for about

32 percent of the total citywide growth in taxable sales, as shown in Table 12. Dining

establishments accounted for almost 80 percent of the total Downtown sales over this period.

Lease, Vacancy, and Sales Rates. The Downtown' s success is illustrated by relatively high

occupancy and lease rates, particularly in the Historic District. According to retail brokersactive in Downtown, space in the Historic District typically rents for $4. 00 per square foot

and vacancies generally turn over relatively quickly. However, on the upper ( south) portions

of Castro Street outside the Historic District, rents are significantly lower, closer to $ 2. 00 per

square foot, reflecting its position as a lower- demand location.

In addition to strong lease and vacancy rates, rough estimates of taxable sales per square

foot suggest that businesses are generally performing well and significantly exceeding theiraverage sales performance estimated in the EPS 1999 Report. As shown in Table 13, retail

stores overall achieved average sales of about $250 per square foot compared to about $ 131

per square foot in 1998. Although again the sales from dining and drinking establishments

are lifting the overall average, most of the other retail categories ( with the exception of

apparel) generally meet or exceed national standards for typical, small- scale retail in a

downtown setting.

Renovation and Tenant Turnover. Although frequent tenant turnover can be indicative of

a declining retail district, in this case it appears to suggest the opposite. Although it isimportant to have a stable core of tenants, changes in a retail district can reflect beneficial

adaptation to market conditions and gradual improvement as a shopping destination. High

turnover can also help to maintain a retail district' s novelty and vitality, attracting additionalcustomers with the arrival of each new business.

9 In the 1999 Market Feasibility Study conducted by EPS, total taxable sales were $ 43 million for theDowntown and $ 923 million for all of Mountain View.

Economic& Planning Systems, Inc. 32 P 2Qoo05 zvunvDn. mo. oarooftzo, iee,=reouzmc

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Table 13

Summary of Downtown Retail Sales by Category

Sales

Sales Tax Category Sq Ft Square Feet Amount % of Total

Apparel and Clothing Accessories Stores 116 14, 173 $ 1, 649,505 2%

General Merchandise Stores 197 51, 000 $ 10,060, 225 13%

Food Services and Drinking Places 285 196, 608 $ 56,021, 685 75%

Personal Services 172 27002 $4, 643 779 6%

Total Retail and Food Services 251 288,783 $ 72,375, 194 97%

All Other Outlets 156 16502 $ 2, 582, 439 3%

Totals All Outlets 246 305,285 $ 74,957, 633 100%

Totals 1998[ 1] 131 422,966 $ 55,440, 283

1[ Adjusted for inflation to 2009$.

Source: 1999 EPS Market Feasibility Study; City of Mountain View; Economic& Planning Systems, Inc.

Although detailed data is difficult to come by, anecdotal evidence suggests that many of

the retail properties on Castro Street have undergone significant renovation and re-

tenanting. In addition to the facade improvements and new development facilitated bythe Revitalization Authority ( e. g., CVS Pharmacy and ground floor of Tishman Speyer

building), reinvestment has been undertaken to accommodate a range of new tenantsover the past five years, as shown in Table 14. It is worth noting that of the 43- plus

tenants that have opened since 2005, about 67 percent are located in the Historic District

with about 20 percent located elsewhere on Castro Street and 14 percent on other

Downtown streets). About 72 percent of these new tenants are eating and drinkingrelated establishments.

Tenant Types and Market Position

Although as a whole the Downtown functions as a highly successful retail location, the tenant

types and mix remain relatively one- dimensional ( i. e., eating and drinking), representing alimited segment of the retail industry. Specifically, similar to the condition that prevailed ten

years ago, eating and drinking establishments dominate the Downtown retail sector despitesignificant turnover and property upgrades. Most other major retail category besides restaurantsare either underrepresented or nonexistent. In addition, most tenants consist of local,

independent, and/ or" mom and pop" retailers, and high- volume national or credit retailers are

virtually nonexistent ( with Starbucks, CVS Pharmacy, and Subway being the notable exceptions).

Economic& Planning Systems, Inc. 34 0‘ z0000s, zm, ern. me,. e, operozo» zmare, o„ zm,

Table 14

Active Retail Establishments Opened Since 2005

Year

Category/ Tenant Opened Address

Eating and Drinking Establishments1) Bushido 2010 156 Castro St

2) Castro Bistro and Wine Bar 2011 Opening Soon3) Pho Garden 2010 246 Castro St

4) Thaiphoon 2010 185 Castro St

5) Saavy Cellars 2010 750 W. Evelyn Ave.

6) Bangkok International Inc 2009 185 Castro St

7) Tsunami Sushi 2009 209 Castro St

8) Nami Nami 2009 240 Castro St

9) Sakoon By Bombay Garden 2009 357 Castro St

0) Savory 2009 873 Castro St

1) Neto Cafe& Bakery 2008 135 Castro St

2) Noya Restaurant 2008 142 Castro St

3) Zpizza 2008 146 Castro St

4) Haute Cuisine 2008 228 Castro St

5) Zen Lounge 2008 251 Castro St

6) Bella Vita 2008 300 Castro St

7) Caffe Romanza 2008 301 Castro St

8) New Mongolian BBQ 2008 304 Castro St

9) Bodrum Cafe 2008 383 Castro St

20) Ginseng Bbq & Tofu House 2008 475 Castro St

21) Mediterranean Grill House 2008 650 Castro St

22) Sweet Corner 2008 650 Castro St

23) Hong Kong Bistro 2007 147 Castro St

24) Temptations 2007 288 Castro St

25) Smart Cookie Bakery 2007 698 W Dana St

26) Hong Mi Pei 2007 743 W Dana St

27) Xahn 2006 110 Castro St

28) Shabuway 2006 180 Castro St

29) Godavari 2006 216 Castro St

30) Spica Coffee 2006 650 Castro St

31) Cafe Baklava 2005 341 Castro St

Apparel

32) Boutique 4 2007 279 Castro St

33) Therapy 2006 250 Castro St

Home Furnishings/ General Merchandise

34) CVS Pharmacy 2008 850 California St

35) Home Gallery 2007 285 Castro St

36) Invisible It 2005 650 Castro St Ste 400

37) Jehning Family Lock Museum 2005 175 Castro St

Other

38) Yoga Belly 2010 455 Castro St

39) Art Frame Studio 2007 293 Castro St

40) Printers Inc Bookstore 2005 301 Castro St

Source: City of Mountain View; Economic& Planning Systems, Inc.

Economic 8 Planning Systems, Inc. 524/2011 35 P:120000s120112MVDowntown1Models12014model ccrosls



Detailed data on the relative size and mix of the Downtown' s retail sector over time are provided

in Table 15. As shown, food and drinking establishments have averaged slightly more than

60 percent of total retail sales over the last seven years and this share appears to be increasing

it was 70 percent through the 3rd Quarter 2010). Meanwhile, food and drinking tenants account

for about 40 percent of all retailers, suggesting that their sales performance far exceeds the

average. General merchandise and home furnishing stores represent the next most successful

retail category, with about 23 percent of sales and 13 percent of the establishments. The

clothing and accessories category appears to be an area with particularly strong growth potentialgiven its significant sales growth in recent years ( 830 percent between 2003 and 2009 as shown

in Table 12) despite representing a relatively small proportion of total sales. In addition,

clothing and accessories represents a category well suited to downtown pedestrian traffic thatincludes a high volume of younger professionals, residents, and visitors ( most of the existing

apparel stores appear to be targeted to older females).

Table 15

Downtown Establishments by Category and Percentage of Sales ( 2003- 2010)

Year Average

Sales Tax Category 2003 2004 2005 2006 2007 2008 2009 2010

Clothing and Clothing Accessories StoresB of establishments 9 8 9 11 10 10 10 11 10 5%

of Total Sales 0% 1% 1% 1% 2% 2% 2% 2% 1%

General Merchandise d Home Furnishings Stores

It of General Merchandise establishments 19 17 19 21 19 19 19 18 19 10%

Y of Home Furnishings establishments 6 5 5 5 5 6 7 5 6 3%

of Total Sales 27% 29% 25% 25% 20% 17% 19% 19% 23%

Food Services and Drinking Placesof establishments 72 75 75 77 83 87 81 83 79 41%

of Total Sales 54% 57% 58% 63% 65% 55% 63% 70% 61%

Personal Services

M of establishments 18 21 22 19 21 21 25 14 20 11%

of Total Sales 3% - 3% 2% 1% 1% 7% 5% 1% 2%

TechnologyB of establishments 16 17 18 19 19 16 19 15 17 9%

of Total Sales 5% 6% 7% 2% 4% 11% 4% 2% 5%

other Retail[ 1]

it of establishments 11 12 14 12 12 11 13 12 12 6%

of Total Sales 4°7° 4% 4% 4% 5% 5% 6% 5% 5%

Total Retail and Food Services

a of establishments 151 155 162 184 169 170 174 158 163 85%

of Total Sales 93% 93% 95% 95% 96% 96% 97% 97% 95%

All Other Outlets

W of establishments 27 27 29 30 29 28 31 25 28 15%

of Total Sales 7% 7% 5% 5% 4% 4% 3% 3% 5%

Totals All Outlets 178 182 191 194 198 198 205 183 191 100%

11i Category includes Motor Vehicle and Parts Dealers, Building Material and Garden Equipment, and Food and Beverage Stores inorder to protect proprietary information.

Source: City of Mountain View', Economic 8 Planning Systems. Inc

A recently completed pedestrian " intercept" survey conducted as part of the Downtown Parking

Study further supports the Downtown' s profile as primarily an eating and drinking districtcatering to the office lunch and evening dining segments. As shown in Table 16, over half

Economic& Planning Systems, Inc. 36 P120000:, 20 utMVos wntow,; Rep" rr'120112dr, rtru24",



51 percent) of all respondents stated their trip purpose was to eat compared to only 12 percent

for shopping. Meanwhile, about 20 percent reported being in the Downtown for work ( during the

day this response accounted for 30 percent of the total). Among other things, these results alsosuggest that the Downtown experiences significant foot traffic that currently does not patronize

the non- dining establishments. In other words, there appears to be significant untappeddemand.

Table 16

Pedestrian Intercept Survey Results

Midday Responses Evening Responses All Responses

Trip Purpose

Working 30% 43 6% 6 20% 49

Shopping 12% 18 12% 12 12% 30

Eating 37% 54 71% 73 51% 127

Other 21% 30 12% 12 17% 42

Sample Size 100% 145 100% 103 100% 248

Source: Wibur Smith Associates Downtown Mountain View Parking Study, Economic& Planning Systems, Inc.

As described in Chapter 2, the existing space in the Historic District, the area that appears to

account for the bulk of Downtown sales, is characterized by relatively small spaces in fragmentedbuildings. This combination of small space and high rents limits the retail establishments that

can survive in the Downtown to mainly restaurants and independent retailers. Foodestablishments are one of the few product types that can perform well in this type of space

because they achieve high enough sales per square foot to cover the high rents for such a smallarea. Successful independent retailers can more readily adapt to these conditions because theyare more flexible than retail chains who often have pre- designed floor plans with square- foot

minimums.

Residential

Regional Economic Context

Both the Peninsula and Silicon Valley ( including Mountain View) have increasingly become " job

rich" communities with a limited supply of available land to accommodate residential

development. This condition is especially true in Mountain View which added four times as manyjobs as employed residents between 2003 and 2008. In other words, Mountain View companies

continue to draw residents from neighboring communities because it lacks the housing stock to

accommodate them locally.

Economic& Planning Systems, Inc. 37 P: 120000,¢ mrznwo.mm., Pweeo"; 2m udamnt1zdac



Going forward, employment growth is expected to continue to outpace population growth at boththe regional and local level. For example, the General Plan projects Mountain View will add

about 14, 714 new residents between 2010 and 2030 compared to 23, 770 new jobs. This job-

rich/ land- poor environment suggests strong and growing demand at both a local and regional

level for higher- density housing. Increasing home prices combined with reduced land availabilitywill continue to improve the economic attractiveness of higher- density development in the longterm.

Downtown Market Performance

As a vibrant mixed- use district, Downtown Mountain View contains a variety of residential

product types, ranging from single- family, townhomes, condominiums, and apartments.However, given limited land availability most new development over the last 20 years has

focused, and will likely focus in the future, on higher- density product types as well as some

additions to existing single- family units. Although the recent economic downturn has stalled

activity in the last several years, longterm market conditions remain highly favorable given theDowntown' s well- regarded urban amenities, strong employment opportunities, and limited land

supply, as described above.

The following market variables further document the quality and strength of the Downtown

housing market, focusing on the multifamily and condominium market since land values will

likely deter significant single family development in the Downtown going forward:

Price and Transaction Trends. Mirroring a trend throughout the Bay Area, average homeprices experienced rapid escalation in the City and Downtown in the early to mid part of the

past decade. Although not totally immune from the housing crisis, Mountain View did notexperience the dramatic price declines felt elsewhere in the State and nation, as shown in

Table 17. In fact, in terms of condominium sale prices, 2010 was actually a high watermark

for the Downtown, with a median price of about $ 660, 000, exceeding the previous high in

2007. Overall, it appears that transaction rates declined in both the Downtown and the City

as a whole as homeowners elected to ride out the housing crisis.

Economic& Planning Systems, Inc. 38 P. zoaaos120u2MVDownrow,7 Peportpvp2dafryuxmc




Table 17

Condo Median Sales Price and Transactions

2006- 2010

ItemlLocation 2006 2007 2008 2009 2010 % Change

Median Condo Sale Prices

Downtown 584, 000 $ 665, 000 $ 625, 000 $ 550, 000 $ 659400 111 129%

Mountain View 559,500 $ 606, 500 $ 596, 150 $ 540, 000 $ 550. 000 1 7%

Santa Clara County $ 500,000 $ 530, 000 $ 435,000 $ 320, 000 $ 345, 000 31 0%

TransactionsDowntown 29 37 29 14 17 41. 4%

of City 7% 10% 11% 5% 6%

Mountain View 434 356 262 289 265 38. 9%

Santa Clara County 5, 151 3. 845 2, 910 3, 927 3, 854 25. 2%

I11 Three transactions with sales prices over$ 900, 000 were excluded from the calculation.

Sources Rereporlcorn: Economic and Planning Systems, Inc.

Foreclosure Rates. Reflecting Mountain View' s relatively favorable residential market, boththe City and Downtown have not experienced the level of foreclosures that have plagued

many other California markets. As shown in Table 18, the 2010 foreclosure rate in theDowntown was lower than the City as a whole, which in turn, was less than half the rate for

Santa Clara County as a whole. This is particularly impressive given that the County' sforeclosure rate was itself about half that of the State average.

Table 18

Comparison of Mountain View 2010 Foreclosure Rates

Total Total Units Rate of

Location Foreclosures ( less Mobile Homes) Foreclosure

Downtown(1)

43 3, 828 1. 12%

Mountain View 406 32, 609 1. 25%

Santa Clara County 23, 010 609, 828 3. 77%

California 840, 701 12,994, 928 6.47%

Ill Data for the 94041 zip code.

Sources: RealtyTrak.con: California Department of Finance: Economic and PlanningSystems, Inc.

Economic& Planning Systems, Inc. 39 P¢ 0000n20112MVO wnmxnipePo, p2ou2eaftpu2 dmc



Market Segmentation

Quite apart from price and other market pressures resulting from limited land supply, certain

segments of the population tend to exhibit particularly strong preferences for high- density,

downtown environments due to the unique amenities they offer. These segments are described

below with reference to their applicability to Downtown Maintain View. vo

Young Professionals and Singles. Young professionals, those living alone, withhousemates, or as a couple, have filled many of the higher- end compact residential products

in other urban and suburban centers in California. Given the higher pricing associated with

such products, this segment often consists of young professionals with above- average

incomes for their age group. The appeal of these unit types is often related to their

proximity to dining and entertainment options; short commute times associated with the

proximity to work, often via walking or direct transit links; and a more hip culture than isavailable in more suburban environments. Downtown Mountain View is well- endowed with

those types of amenities that attract this segment.

Young First- Home Buyers. Young families looking to purchase their first home often look

for smaller or more compact residential development, primarily because of affordability and

family size. These families are often looking to purchase a smaller home as a way to get intothe market with the intention of trading up to a larger home as the family grows. Thebiggest appeal of compact residential development for this group, however, is affordability.

Empty Nesters/ New Starters. Empty nesters generally refer to parents who are still

together, but whose children have left home. No longer needing the additional space, these

couples will often downsize to a higher- priced, higher-density product in safe walkableneighborhoods that offer easy access to cultural, entertainment, and eating and drinking

amenities. New starters refer to individuals undergoing a major change in lifestyle because

of a significant event, such as a divorce or career change. They often seek high- density

housing because of both affordability and lifestyle factors.

Seniors. Seniors often seek a safe and walkable community in a more quiet part of town

and prefer to live among similar- aged people. Access to public transit also is a plus. Somesenior developments also provide special amenities, such as a 24- hour doorman, additional

on- site staff to assist with daily needs, and even health care professionals. The existingservices in the Downtown that may appeal to this segment include the public library, medical

offices, and proximity to retail and transit.

10 From Who Lives Downtown," The Brookings Institution, Living Cities Census Series, November2005.

Economic& Planning Systems, Inc. 40 P: 2000a,¢ m 12MwownmrmKryo„ @0 umarcrp<u.mc

4. DEVELOPMENT PROSPECTS AND STRATEGIES

This Downtown Mountain View Economic Study and Development Strategy Report was conceivedas a means to fine- tuning the City' s planning, public investment, and redevelopment activities in

the Downtown area once the Revitalization Authority sunsets. The foregoing chapters documentthe status of Downtown redevelopment and provide a detailed assessment of market conditions

and potentials. This chapter provides policy direction for furthering achievement of City goals for

the Downtown within the context of ongoing City planning and policy initiatives, including the

emerging General Plan Update. Specifically, market opportunities are summarized, followed by

recommendations for the development opportunity sites that have been identified, and finally, aset of recommendations intended to guide subsequent development and revitalization efforts.

Market Opportunities

The analysis provided in Chapter 3 concludes that Mountain View' s Downtown has strong

market prospects for the cross section of residential and commercial uses that are increasingly

seeking attractive, transit- accessible downtown locations. However, Mountain View' s Downtownalso exhibits certain market limitations, especially in its retail sector, as well as limited

availability of sites that can accommodate new projects and tenants. At the same time the City' sobjectives for the Downtown need to be placed in a citywide context as it moves forward with

revitalization of other existing retail areas including the San Antonio Center, the El Camino Real

Corridor, and the existing neighborhood shopping centers, as outlined in the General PlanUpdate.

The following sections further address the specific market opportunities and constraints that willinfluence the product types and tenants achieved as a part of ongoing Downtown revitalization

efforts. A key goal is to identify opportunities and support comprehensive planning and policies

so the Downtown can successfully adapt to an evolving competitive environment unfolding bothwithin the City and beyond.

Retail Opportunities

As described in Chapter 3, the Downtown' s retail sector is quite successful from the perspective

of existing tenants and property owners but currently lacks the depth and range of retail

offerings that it appears capable of achieving. While the retail sector is performing far better

than it did a decade ago, it remains dominated by eating and drinking establishments and lower-

volume specialty shopping. The dominance of food and beverage establishments has becomeself- reinforcing and is further perpetuated by the preponderance of very narrow, small retail

properties lining Castro Street, especially in the Historic District. However, given the

Downtown' s level of activity, density, and accessibility, it may be possible to attract larger-format retailers if the proper sites can be made available. Adding new and potentially larger-

format retailers ( e. g., space for tenants larger than 3, 000 square feet) could breathe additionalvitality and energy into the southern portion of Castro Street, which currently lacks the level ofpedestrian activity experienced further to the north.

Economic& Planning Systems, Inc. 41 v. zoaore: vm, zmwo, M, w, v a, nzmueareq, u.eo




Prototypical Main Streets

As part of this report, EPS researched other successful Main- Street- oriented corridors within the

Bay Area that share elements related to scale, character, and demographics to DowntownMountain View. However, these selected streets, listed in Table 19, generally possess more

mature and high performing retail sectors than Mountain View, representing the next step thatthe Downtown should aim to achieve. The goal of this effort was to describe certain Main- Street

prototypes, including the type of regional and independent retailers that they are able to attract,

as a basis for identifying various themes and " aspirational models" that might be applicable toDowntown Maintain View.

As shown in Table 19, these successful streets have a varied mix of retail tenants and have

achieved a stage of development at which they can attract national chain retailers ( e. g., Apple

Store, Williams- Sonoma, or Gap). For example, University Avenue in Palo Alto has a range ofnational tenants including Restoration Hardware and Haagen- Dazs as well as local merchantssuch as The Playstore and Black Diamond Sports. The presence of national retailers can boost

the performance of Downtown because these tenants can attract higher volumes of visitors by

offering a product line and a name brand that customers can identify." Shoppers come to these

stores for an item they need but will stay in the area if another store catches their eye.

In addition to a healthy mix of local, regional, independent, and national chain retailers,

successful Main Streets generally carry a range of retail categories ( e. g., home accessories and

decor, apparel, dining) and thus can appeal to multiple types of consumers and shoppingmotivations. For example, as shown in Table 19, Chestnut Street in San Francisco sells

electronics ( the Apple Store), clothing ( the Gap), and kitchen- ware ( Williams- Sonoma).

Although many successful Main Streets have a dominant theme( s) that provides an identity and

sense of place ( e. g., culinary, home furnishing, entertainment), these offerings arecomplemented by other successful tenants. Having a range of retail options helps to diversifythe type of shopper that visits these areas.

Direction for Downtown Mountain View

EPS' s professional experience suggests that diversity is critical to successful downtowns. Inaddition, as reflected by the wide range of businesses shown in Table 19, downtown retail must

differentiate itself from the more formulaic retail found in large malls and shopping centers.

Unlike centrally managed malls or shopping centers that generally rely on more formulaic

tenanting, the tenant mix in downtowns is generally more eclectic and dynamic and is often whatmakes them attractive and unique. As such, the most successful tenant mixes in downtown

settings will evolve organically and cannot be definitively described in terms of specific tenants ata given point in time. Moreover, the optimal mix of businesses can change over time based on

evolving market trends, local perceptions, and other factors.

tt By way of example, although the vast majority of all retail stores in the United Statesapproximately 90 percent) are single- store businesses, regional or national chains account for

substantially more than half of all retail sales.

Economic& Planning Systems, Inc. 42 v. z0000:, zouznvro., m., wm.? m, ze., rz, ouzoo,

Table 19

Examples of Businesses in Successful Downtown Areas

Business Name Type of Businesses Category

University Ave. Palo Alta

Apple Store Computers National Chain

Gleim the Jeweler Jewelry Regional Chain

The Stanford Theater Movie Theater Mom and PopRestoration Hardware Home furnishings National Chain

Paperwhirl Custom invitations/ printing services Mom and PopHaagen- Dazs Ice Cream National Chain

Design Within Reach Furniture Store National Chain

Cielo Fashion Boutique Regional Chain

The Playstare Natural toys, wooden toys and organic toys Mom and PopBorders Books Book Store National Chain

Black Diamond Sports Sporting Goods Mom and Pop

Chestnut St. San Francisco

SOMA Wholesale Florist Florist Mom and PopLucky Brand Clothing National Chain

photograph 8 frame Custom Framing Regional Chain

AMA Fashion Store Women' s clothing Mom and PopGNC Vitamins National Chain

Gap Clothing National Chain

Fireside Camera Camera Store Mom and PopJamba Juice Smoothies National Chain

Apple Store Computers National Chain

Williams- Sonoma Furniture/ Home goods National Chain

Catnip Si Bones Pet Store Mom and PopPaper Source Stationery National Chain

Pottery Barn Furniture/ Home goods National Chain

College Ave. OaklandTrader Joes Grocery Store National Chain

FIT Women' s clothing Mom and Pop

Zachary' s Chicago Pizza Pizza Regional Chain

See Jane Run Fitness apparel Regional Chain

Tootsies Women' s shoes Mom and Pop

Barney' s Gourmet Hamburgers Restaurant Regional Chain

Viva Dive Fashion Boutique Regional Chain

Imam Fashion Boutique Mom and PopDreyer' s Grand Ice Cream Parlor Ice Cream National Chain

Warm Things Quilted products Regional Chain

Ag Photo Photo and camera services Mom and PopPasta Pomodoro Italian Restaurant Regional Chain

Rockridge Market Hall Local produce, bakery, butcher, florist Mom and PopFenton MacLaren Home Furnishings Furniture Local Chain

Rockridge Kids Kids products Mom and PopSafeway Grocery Store National Chain

Red Hound Pet Store Mom and Pop

Source'. Economic 8 Planning Systems, Inc.

Economics Penning Systems. Inc. 524/2011 43 PI200005¢ 0112MVDOwnlownlModels120112mcdel_mmxis


Economic Study and Development StrategyDraft Report, lune 2011

The Downtown will continue to function largely as it currently does as a center of employment

and civic facilities, with a retail sector dominated by eating and drinking and specialty shopping

establishments along with some neighborhood convenience shopping. Market, policy, and

economic factors all underpin this conclusion. However, strategic planning and policy can help

guide the Downtown in a desirable direction and help to build on its existing strengths. In thisregard the Downtown does present a number of opportunities for improvement both in quality

and quantity of retail uses, particularly with regard to disposition and development of identified

opportunity sites, as enumerated below.

1. Consider potential for a retail destination through the attraction of more diversified

retail tenant mix. The demographic profile of Downtown' s diverse user groups, including

office workers, residents, and eating and drinking patrons, as well as participants in theDowntown' s civic, cultural, and entertainment activities, represent an attractive market for a

variety of retail tenants. Many of the Downtown residents, workers, and visitors are young

with a relatively high level of disposable and/ or discretionary income dedicated to morecasual, incidental, or even impulse related consumption. A range of retail tenants actively

target this market segment and, if successfully recruited to the Downtown, such tenants

would further expand its offerings and market draw. In particular, apparel establishments

are increasingly attracted to downtown locations as a result of the foot traffic they generate

and the demographic composition of their user groups. However, in 2009, clothing stores

accounted for only 2 percent of the Downtown sales. The City could also seek to build on its

budding home furnishing and accessories sector which currently accounts for about 3 percentof Downtown retail establishments. Successful stores in these categories will draw a

different type of visitor to Downtown.

While the City has long targeted a grocery store in the Downtown, market trends, localcompetition ( existing community shopping centers), and site constraints ( e. g., need for

adequate parking) may make such a retailer difficult to attract. In addition, it is not clear

that such a use would significantly add to the Downtown' s emerging role as a more diningand lifestyle destination. In fact, a grocery store that serves lunch options may actually

compete directly with existing eating and drinking establishments. In any case, a full- service

grocer does not appear to be a missing link in Downtown and thus not critical to its continued

success.

2. Consider potential for more national or regional retailers. Currently, the only national

chains are food and beverage outlets, such as Starbucks, CVS Pharmacy, and Subway.

These food retailers are important, however, because they are typically the pioneers in retail

locations and can entice other national and regional retailers to move into the area. As

noted, the addition of several high- profile " branded" retailers, in categories other than eating

and drinking, could draw a different type of visitor to the Downtown, greatly expanding itsconsumer base. The advantages of such retailers need to be balanced against the need to

keep the area unique by maintaining local businesses.

3. Continue to upgrade and revitalize existing buildings, tenants, and properties.

Downtown property owners/ developers, guided by the Precise Plan and in some cases with

assistance from the City, have been quite successful with renovation efforts that haveresulted in a substantial upgrading of tenants over the past decade. Identification of under-

Economic& Planning Systems, Inc. 44 v:¢ omwvauzmwo. mw"; a omzmueareo zeo




performing retail space and evaluation of obstacles to improvement and expansion can lead

to further improvement of the existing building inventory. It is also important to note thatmost regional and national retailers require larger space as well as certain levels of foot

traffic before they move into a new neighborhood. Given that Downtown appears to possess

substantial foot traffic, a lack of quality space appears to be the biggest impediment.

Office

As discussed in Chapter 3, the Downtown is a highly successful office market that is currently

constrained by lack of space rather than demand. Indeed, unlike the retail sector, the Downtown

office market already boasts a regional rather than primarily local draw as a result of its linkage

to the Silicon Valley high- tech economy; the Downtown setting is highly attractive to smaller and

start- up companies seeking a high- amenity location with an aggregation of similar high- tech-oriented companies. In addition, the office sector is currently a critical if not primary economic

driver for the Downtown' s retail sector and thus its continued success will be a key ingredient to

ongoing revitalization efforts.


The strategic issue going forward is how to incentivize the development of additional officespace, especially in light of existing financial and land assembly issues. As described earlier, for

example, tighter lending practices ( i. e., a 50 percent pre- leased threshold for financing) have

delayed several fully entitled office developments. Although longterm market forces are

expected to play a positive role in addressing these challenges, City involvement may also benecessary. For example, modification to existing land use requirements codified in the

Downtown Precise Plan related to parking standards, Floor Area Ratios ( FAR), and/ or buildingheight might improve development economics. For example, the City may want to re- evaluate

on- site parking requirements or allow for an additional story in order to incentivize development

as specific locations. In addition, the City may also be able to facilitate office developmentthrough assistance in land assembly.

Residential

Higher- density residential development has been an integral part of the re- emergence of

Downtown Mountain View over the last 20 years. Although more recently the mortgage default-based financial crisis has put a damper on new residential construction, this condition is expected

to be temporary, especially in high- value communities such as Mountain View. As documentedin Chapter 3, going forward, high- density housing ( e. g., condominiums, townhomes, and

apartments) will continue to be a successful component of the City' s future development andredevelopment efforts assuming adequate supply opportunities ( i. e., in- fill sites) are available.


High- quality residential development should be encouraged in the Downtown because of itsability to offer the following key revitalization benefits:

Full- Service" Environment. New residential development will increase retail demand in

the District and encourage a full- service environment that is often associated with successful

Economic& Planning Systems, Inc. 45 0. So000e@0„ 2mVDawmow' laepoa 2 1 me., ervf 2 dr



downtowns. Revitalization of the Commercial District would benefit from nearby and new

residents after 6 p. m. when many of the offices close. Even if they do not shop, these new

residents can provide an " eyes on the street" presence making the environment more

inviting to those who do not live there. They can also create pedestrian traffic that mightencourage some retailers to expand their operating hours, remaining open later in the

evening.

Financial Feasibility. Over the long term, the market- rate residential market is likely to bethe most lucrative from a development perspective. The residential for- sale market is

strong, characterized by low levels of supply and increasing values despite a national

downturn. Consequently, the inclusion of residential components into development projectsin the Downtown likely will improve their overall financial feasibility. Indeed, residentialelements may represent the " carrot" that makes an otherwise uneconomical renovation and

redevelopment of Downtown property financially viable.

Assessment of Opportunity Sites

As part of this analysis, EPS, working with City staff, identified a set of key opportunity sites inthe Downtown that might be well- suited for future development. The potential opportunity siteswere selected based on their potential to result in catalytic projects that could spur further

private revitalization in surrounding areas. These sites also offer urban design enhancementsthat would further establish the Downtown as a desirable transit- oriented center with a well-

balanced mix of uses and pedestrian- friendly urban environment. As shown in Figure 4, withseveral exceptions, most of the sites overlap with the underutilized parcels used to calculate

future growth in the General Plan 2030 Update, as discussed in Chapter 2.

The six initial opportunity sites identified as part of this process are briefly described below andsummarized in Table 20. It is anticipated that EPS will subject several of the sites discussed

below to further analysis based on direction from City staff and other stakeholders, focusing on

their development feasibility from a financial perspective.

1. South East Corner of El Camino Real/ Castro Street

This 0. 6- acre site located on the corner of El Camino Real and Castro Street includes a one-

story bike shop and a bank with surface parking, as well as a small- pocket park owned bythe City. It provides a densification opportunity that would make it a prominent" brand"

location along the busy El Camino Real thoroughfare, providing a visual identification orgateway" to the Downtown, which does not currently have a strong visual presence along El

Camino Real. The site also offers the opportunity to" densify" the upper Castro Street area

as a destination providing a walkable and active mix of uses connecting both ends of

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the Downtown corridor, as well as advance the goals of the Grand Boulevard Initiative12.

However, potential " buyout" challenges could complicate development feasibility for higher-

density projects.

2. Bryant Street ( Public Parking Lot 12)

The assembly for this City- owned surface parking lot located at Bryant Street betweenCalifornia and Mercy Streets was recently finalized with the purchase of several residential

parcels to create a relatively large ( 1. 6 acres) and uniformly shaped parcel with minimal

existing uses requiring demolition. In addition to being relatively unencumbered, the BryantStreet site is well located one block off Castro adjacent to the Civic Center, Library, CVS

Pharmacy, and a relatively underutilized public parking structure. The project would likely bea multistory mixed- use building with office or residential over ground- floor retail. The Cityhas evaluated the development feasibility of locating a supermarket here but other uses may

be more appropriate. Any development would need to be sensitive to the transition from thecommercial uses to the east and more residential character of the adjacent neighborhood to

the west.

3. St. Joseph' s Parking Lot

This site is bounded by Castro, Hope, and Church Streets and is adjacent to KaiserPermanente located across the street from the City Hall and the Center for Performing Arts.

It is made up of the church' s surface parking lot, an auxiliary institutional building, and a sitewith the existing medical office building that combine for a 1. 2- acre lot area. The site

provides a densification opportunity along the central portion of the Castro Street corridor

and would extend the " activity" area south of the City' s Historic District. The project could be

a multistory mixed- use building with a potential office or residential component aboveground- floor retail and could benefit from shared parking with the adjacent church. While

the site offers good access and parcel shape for a high- quality development, its current

assemblage and buyout challenges could adversely affect development feasibility of a high-

density product.

4. 383 Castro Street ( Former Wienerschnitzel Site)

The 0. 3- acre site, located on the corner of California and Castro Streets ( at 383 Castro St.),

consists of a single- story restaurant with a surface parking lot behind it. The other threecorners at this intersection include contemporary- style mixed- use office developments withat least three stories in height, consistent with the desired downtown urban texture. As a

result, the Wienerschnitzel site provides an opportunity to complete the intensification of the

final corner, providing a " ground zero" intersection at the top of the Historic District. Theproject would be a multistory mixed- use building with a potential office or residentialcomponent aboveground- floor retail. However, the site' s small size provides a feasibility

12 The Grand Boulevard Initiative is an innovative multi- jurisdictional planning effort ( participants

include 19 separate city, county, regional, and local transportation planning agencies) seeking totransform a 43- mile stretch of State Highway 82 ( also known as El Camino Real) and enhance its roleas a vibrant, commercial mixed- use corridor with a range of professional office, retail, hospitality, and

higher-density residential uses that are functionally integrated within the broader economy.

Economic& Planning Systems, Inc 49 P: 2 ooUS12o1 aMVDo. 00, wnwmortao, nd..mmo„ zmc



challenge for a dense development and may require assemblage of adjacent parcels in order

to produce a parcel of adequate size to incentives redevelopment.

5. Dunn Automotive/ Public Parking Lot 11

This site consists of six parcels located along Bryant Street between Dana and Villa Streets.

It includes three City- owned parking lots, two single- family residences, and a DunnAutomotive shop that combine for 2. 1 acres. The site provides an opportunity to densify theBryant Street corridor with new development sensitive to the transition from the commercial

uses to the east and more residential character of the adjacent neighborhood to the west.

While the site offers a large uniformly shaped area for a high- quality development, its

fractional ownership, including public and privately owned land, presents an assemblage andbuyout challenge. In addition, redevelopment will require reuse of the industrial site for

other uses, which often results in above- expected development costs due to site preparation.

6. Public Parking Lots 4 and B

These lots are owned by the City and are located within a block of the VTI/ Caltrain Station

along West Evelyn Avenue. Lot 4 is 1. 07 acres and Lot 8 is 0. 6 acres, with both currently

serving as City- owned surface parking lots. Proximity of Lots 4 and 8 to the VTI/ Caltrain

Station makes them a desirable location for higher- density office or mixed- use developmentthat would enhance the current workspace cluster in the heart of the Historic District. Office

development would also provide a transition between commercial uses along Castro Street

and older two- story office space east of Lot 8. Provision of residential uses on both lotswould likely be a less desirable alternative given the train- track noise. Both lots provide an

open, even- surface area with minimal existing requiring demolition. However, it is likely thatthe two sites will need to be developed as separate, stand- alone projects given that they are

separated by an active City street.

Recommendations

The 1999 EPS Report identified four separate goals for enhancing the economic performance of

the Downtown that are relevant to the current effort and can provide a basis for assessing

progress and formulating next steps. These goals are ( 1) improving the physical environment

through renovation and redevelopment, ( 2) diversifying the type and mix of tenants,3) improving the quality of retailers to increase overall sales performance, and ( 4) expanding

the scale of businesses to a " critical mass," especially in desired clusters of business types.

Based on the analysis from this current study, the Downtown has made steady progress inadvancing the goals outlined in 1999, as indicated by improved sales, strong lease and

occupancy rates, and increased property values attributable in part to new investment.However, there still remain a number of market and physical gaps that suggest the Downtown

has yet to fully realize its economic potential. In addition, the Downtown will need to effectively

address ongoing changes in both the economic and policy environment to build on recentsuccesses.

As described in Chapter 1, a key goal of this Report is to ensure that the City has a blueprintand strategy for building on the momentum and continuing the success of the Downtown after

the Revitalization Authority sunsets in April 2013, or potentially earlier depending upon the

Economic& Planning Systems, Inc. 50 r:u00005 zm, 2Mwo, Mmohn; aeoomam22a amv„? oo<




results of ongoing State budget negotiations. As part of this effort, it will be important to

identify critical actions in the Downtown requiring the resources and/ or powers of theRevitalization Authority that should be taken in the short term ( i. e., before April 2013). To thisend, the following recommendations provide specific guidance for the City toward achievingcontinuing revitalization and redevelopment of Downtown Mountain View as informed by itsmarket conditions and emerging opportunities evaluated herein.

1. Continue Investments in Public Amenities, Programming, and Facilities

The Downtown has greatly benefited from the substantial public investments made duringthe past two decades. As a part of opportunity site development, there may need to be

additional infrastructure and place- making investments including public space and amenities

e. g., parks, plazas, public art); streetscape and gateway improvements; " green", 215t

Century infrastructure, including telecommunications ( e. g., broadband and wireless access,electric vehicle charging stations); and additional public parking capacity. In addition to

physical improvements, other initiatives, and programming, including improved transit

service, expanded BID program activities, and continued Downtown marketing efforts, will be

beneficial. Ongoing activities and events such as" Thursday Night Live," the farmers market,

and Performing Arts programming should also be sustained.

A key challenge going forward will be to identify and secure adequate and reliable financialresources to sustain a stable or enhance level of investment in the type of public amenities,

programming and facilities described above. Although historically the Revitalization Authorityhas been a critical resource for Downtown investment, after 2013 and potentially earlier it

can no longer use tax increment revenue to finance these activities. The City' s General Fund

has and may continue to provide financial support for Downtown projects or initiatives but

competing demands on this source make it ill- suited and unreliable for major and/ or re-

occurring funding requirements. Consequently, other dedicated and self- supporting financialresources and mechanisms will need to be established.

Table 21 provides a preliminary list of potential financing sources and mechanism that the

City might explore going forward. As shown, a variety of local, State, and federal sourcesmay be available for this purpose, depending on the specific program or project in question,

including special assessments and other taxes, impact fees, land sale proceeds, and privatecontributions. In this regard, the City is currently exploring how the PMAD or the two

existing downtown BIDs might be expanded or enhanced to help fund various investments oractivities that directly benefit Downtown tenants and property owners.

2. Identify and Recruit Desired Tenants

The City should continue tenant recruitment and marketing actions targeting tenants that are

likely to complement and enhance the Downtown' s profile as a vibrant mixed- use district witha range of cultural, entertainment, civic, commercial and residential uses. The notion here is

to pursue a range of tenants that complement existing Downtown uses or serve expected

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increases in employment- based or regional demand for retail goods and services. As

described earlier, the Downtown has emerged as a thriving and trendy mixed- use district

that serves and attracts a highly diverse demographic, including young, employedprofessionals with significant discretionary income. Its orientation is more toward tenants

that appeal to shopping as a leisure activity rather than those that satisfy major householdneeds.

City efforts during the past decade, combined with favorable market conditions and privatesector investment, have more than doubled the retail performance of the Downtown. At

least some of this improvement is attributable to the improving quality of retailers, including

a more advanced restaurant sector which and other newly constructed or improved space

financed by the private sector and in many cases supported and encouraged by the City.

There remains any number of opportunities to continue renovation and tenant upgrade

efforts in conjunction with targeting tenant outreach. As noted earlier, credit retailers ( e. g.,national or regional chains) focused in apparel, specialized home furnishing, accessory and

decor establishments, and / or other specialty categories of the type seen in comparable

Main- Street settings appear to offer particularly promising opportunities for greater diversity

and scale in the Downtown retail sector. These opportunities are generally more likely tooccur on the southern portion of Castro Street because of the potential availability of larger

parcels capable of accommodating the larger floor plate requirements of credit retailers.

The City has commissioned several studies that examine the market feasibility of attracting alarger- format grocery store. Of course, such a tenant is likely to compete with the existing

Asian grocery store on Castro Street. Moreover, even if feasible such a new grocery storedoes not appear to be critical to the Downtown' s successful evolution as a CBD catering to

office workers, eating and drinking, and specialty shopping. In addition, a grocery store may

also compete directly with the Downtowns' well- established dining sector by offering lowercost" take- out" opportunities, especially to the lunchtime crowd. In this context, the City

may also want to explore opportunities for improving the format and product offerings ofDowntown' s existing Asian market as another option for meeting grocery demand.

3. Harmonize Other Citywide Efforts with Downtown Development Objectives

The City is currently involved in a number of ongoing planning efforts including the GeneralPlan Update ( and its" village" concept), related revitalization of existing shopping centers, the

Housing Element, ABAG' s Regional Sustainable Communities Strategy, and the Grand

Boulevard initiative. The City should seek to harmonize these efforts, as necessary, so that

they support, or are at least compatible with, its goals for the Downtown.

Ultimately, market relationships and competition with other areas designated for growth andchange in the City will need to be addressed, including the General Plan' s village conceptsites and other major development opportunity sites such as the San Antonio Shopping

Center and the Century Theater/ retail complex site located at North Shoreline Boulevard atHighway 101. Although not necessarily mutually exclusive, it will be important to ensurethat future retail nodes play distinct roles rather than supply overlapping goods and servicesthat might dilute the Downtown' s role.

Economic& Planning Systems, Inc. 59 eamoam2n, rsnwo. nm,., Aaep, rt2o., 2damm! 12 doc

Downtown Mountain view



In many ways the Downtown has already succeeded in carving out a unique niche within the

broader environment by offering a full- service environment in a historic, walkable, " main-street" format with an eclectic mix of civic, cultural, and employment activity. This type of

environment cannot be replicated by more formulaic retail offerings ( e. g., a " big box" PowerCenter or regional Mall). The predominance of local and independent retailers, including

ethnic and other one- of-a- kind eating and drinking venues, further support the Downtown' s

unique market position. On- going City planning efforts should ensure that the Downtown cancontinue to build on a market orientation that draws both local and regional shoppers seeking

a trendy, " place- based" retail experience, whether for dining or casual window shopping, incontrast to the more conventional, auto- oriented malls, strip centers, or supermarket-

anchored shopping centers that are widely available in The Peninsula.

In contrast to the Downtown, the San Antonio Center with its larger floor- plates, on- site

parking, and more cohesive marketing profile appeals to national, chain merchandisers thatattract a regional customer base seeking to meet more specific and conventional shoppingneeds. Meanwhile, the" Village Center" concept articulated in the General Plan Update is

designed to meet the daily shopping needs of nearby residents with a focus on groceries andother convenience goods. Finally, the Century Theater/ retail complex, with its easy

accessibility from Highway 101, will likely remain more of a regional entertainment

destination offering first- run movies and other recreation uses complimented by mainstreameating and drinking establishments.

The ongoing planning efforts for the respective venues described above should seek topreserve clear market distinctions in order to support the success of each while maintaining a

balanced and supportable retail sector citywide. Of course, given the amount of space in

each of these locations, and the need to provide property owners with some flexibility in

tenanting decisions, there will inevitably be overlap in retail categories. However, so long asplanning and policy decisions seek to reinforce the primary market orientation of eachlocation, Mountain Views' strong regional trade area demographics will be sufficient tosupport their respective market positions. For example, City policy should ensure that the

Village Centers" focus on neighborhood shopping opportunities rather than specialty orentertainment- oriented uses. Meanwhile, the San Antonio Center should maintain its focus

on regional, larger-format retail offering and limit its restaurant offerings.

4. Evaluate and Prioritize Opportunity Sites

Six significant opportunity sites have been identified as a part of this development strategyeffort, as described above. Each of these sites has potential for redevelopment that can help

in achieving overall Downtown development objectives. However, the level of actual

development opportunity and related development feasibility may vary considerably, alongwith the relative contribution of the project to broader Downtown development objectives.

For example, development opportunities that increase the level of activity along the southern

portion of Castro Street may be provide particularly strong urban design benefits by creatinga destination( s) that connects the Historic District with El Camino Real. Accordingly, an effort

should be undertaken to establish priorities for the opportunity sites focusing on those with

the least constraints and the highest benefit to the City.

Economic& Planning Systems, Inc. 55 P. i2OQ O+ p" uznw" w" mw, neep" mzv nwa " uz d" c



It is anticipated that EPS will subject several of the sites discussed above and summarized in

Table 20 to further analysis based on direction from City staff and other stakeholders,

focusing on their development feasibility from a financial perspective. Specifically, thisanalysis will utilize a static cash- flow pro- forma model to simulate the development of

various real estate prototypes on selected sites from the perspective of a private investor.

A key goal will be to identify economic obstacles that might prevent targeted sites fromredeveloping into " catalytic" uses as envisioned. In addition, the financial feasibility analysiswill seek to determine if the current designations and standards embodied in the Downtown

Precise Plan support or deter redevelopment of various types and densities.

As a part of this effort, measures that incentivize targeted developers and businesses to the

Downtown may need to be considered, including land use policy or development regulation

incentives ( e. g., set- backs, height, outdoor seating), fee deferrals/ waivers and otherexemptions, permit streamlining, site consolidation, land write- downs, lease buyout, etc.

Although other downtowns have effectively utilized these policy tools and mechanisms, each

should be considered on a case- by- case basis as the development feasibility of individual

opportunity sites are further explored. Such measures will be increasing important to

maintaining momentum once the Revitalization Authority ends in two years ( April 2013), orsooner, given the Governor' s State Budget proposals.

The Downtown Precise Plan and other public and private investment efforts throughout the years

have helped create a successful full- service downtown with quality amenities, valuable transit

center, and a thriving CBD. This Report guides staff and policymakers in continuing the positivemomentum the Revitalization Authority initiated in 1969. It also builds on the EPS 1999 Report

focusing on current market conditions and future opportunities in the Downtown. Today, theDowntown is vibrant, and in many respects, is Mountain View' s civic, cultural, dining, andentertainment district. While significant investment has been completed in the Downtown, there

remain many opportunities detailed in the suggested Recommendations, which provides ablueprint for future planning, designing, and public and private investment designed to build on

existing success.

Economic& Planning Systems, Inc. 56 P. 2000Os @O112MVO0 wnmwnleeym@O, neaftmnz eon

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